Both audit and assurance services play a key role during the evaluation of a company’s financial record. These procedures are followed to verify the accounting record available with a company. This helps to ascertain whether the record is accurate or not. Furthermore, audit and assurance ensure that all the record is kept in line with the prevailing accounting standards. However, there is a difference between audit and assurance services.
So without any further ado, let’s chalk out the key differences between assurance and audit services.
During an audit, all the accounting entries available in the company’s financial statement are thoroughly evaluated. The audit team tries to judge the accuracy of a financial report by taking into account its key aspects. These include:
- Accuracy and authenticity
- Follows accounting standards and principles
- Presented in an ethical and fair manner
This process helps to point out any false entry in financial records such as fraud, misuse of funds, or fraudulent activity. Both external and internal auditors perform the audit. Internal auditors are the employees of a company, who conduct an internal audit. On the contrary, external auditors are independent auditors, who are not part of a company being audited. Check out this blog post on internal vs external auditors that highlights the major differences between internal and external auditors.
The audit department of a company performs an internal audit after regular intervals. This helps to verify the financial report and keep it in line with the accounting standards. Nevertheless, a company is bound to hire external auditors to seek an unbiased audit report.
After discussing the audit, let’s take a look at assurance services. It involves the procedure of assessment regarding the financial records and accounting entries. Assurance services are provided by independent professionals, which help to improve the quality of information for the decision-makers. For instance, assurance services can review any financial transaction or document i.e loan, contract.
This certifies the validity, authenticity, and correctness of the document being reviewed. Furthermore, assurance services can assist companies to overcome the complexities and risks associated with third-party relationships. Assurance is a way to enhance the relevance, value, and transparency of information held by a company.
The major difference between assurance and audit services relates to the key purpose. Assurance is not meant to correct the issues found in the accounting records. On the contrary, the true purpose of this procedure is to measure the compliance of a company in terms of following the accounting standards and principles.
Assurance relies on key aspects like assessment of the procedures followed during financial operations of a company. Hence, the assurance team closely monitors the operations and procedures. The assurance explains that a specified procedure needs to be followed for gaining maximum outputs.
Below are the five elements of assurance engagement:
- Three-party relationship (Practitioner, Responsible party, and Intended users)
- Relevant subject matter
- Appropriate criteria
- Sufficient evidence
- A conclusion or expression of opinion within a written report
The basic aim of assurance is to verify whether the financial reports of a company are accurate. This process helps to assure that no fraudulent activities are done by/in the company. It also rules out the chance of any misrepresentation regarding the financial records of a company.
Furthermore, assurance is a way to observe and analyze the process, procedure, and operations. It ensures to improve the quality of information available with a company. Hence, stakeholders can make impressive decisions for the better growth of a company. This process also works well in a wide range of areas including customer feedback, employee feedback, and financial information.
Salient Differences between Audit and Assurance
The notable differences between audit and assurance are as follows:
- Audit is a procedure of closely monitoring the accounting information provided in a company’s financial statements. Assurance, on the other hand, involves assessing and analyzing different operations, processes, and procedures.
- Another key difference between audit and assurance services relates to the basic aims of these procedures. Audit ensures that the financial reports are presented fairly, ethically, accurately, and comply with the accounting standards/principles. Assurance evaluates the accuracy in given financial reports/records and conveys the authenticity of such information to all stakeholders.
- An auditor owns extended rights, which help to access any kind of information. On the contrary, assurance auditor is provided with fewer rights, as this process relates to a specific area in the company’s financial records.
- Audit requires more time and resources as compared to assurance services.
- Audit is the first step, whereas assurance procedure starts once the audit is complete.
- Audit is a way to disclose any fraudulent or dishonest activity i.e misuse of the fund or misrepresentation of facts. Assurance provides true and authentic information to the stakeholders, which helps in reaching a better decision.
|It involves evaluation of the accounting information available in financial statements.||Assurance is a way to analyze and assess the procedures, operations, and processes.|
|The basic aim is to present fair and accurate financial information that also follows accounting principles and standards.||It ensures that the presented accounting information is accurate. Meaning thereby, there are no misrepresentations or irregularity in such a report.|
|The audit is performed under international auditing standards.||The practitioner may restrict to a specific area due to the assurance terms.|
|All stakeholders of a company are engaged||Assurance may restrict to one type of stakeholder|
|Resources and time necessary for conducting an audit are relatively higher||Resources and time required for assurance are relatively lower|
|Audit points out any dishonest activity or misuse of the funds in financial statements||Assurance is done after the audit and provides essential information for better decision making.|
In this article, we have tried to draw out a clear difference between audit and assurance services. Although these processes are different from each other, yet they are closely linked. Hence, they are equally important in evaluating the performance and financial records of a company. Audit and assurance identify any misrepresentation or fraudulent activities in the accounting records. In addition, these processes provide essential information to the stakeholders, which is essential for making better decisions.
If you are searching for highly professional yet affordable auditing and assurance services in Malaysia, you can consult us anytime. We are one of the best audit firms in Malaysia especially when it comes to auditing, assurance, and consultancy services.