What does auditing and assurance do?
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The company’s management, board of directors, and shareholders hire qualified, competent, and independent audit firms (usually called CPA firms) to conduct the audit of the financial statements of their company. The audit is usually for a specific period (usually from 1 Jan to 31 December) for certain purposes including the requirement of the company policies, a statutory
requirement, or as required by their banker. The appointed auditors conduct an audit to see whether the accounting and financial reporting prepared by the management is following the applicable financial reporting framework or not. It is also reviewing whether the applicable law is complying with by the company. The completeness, accuracy, and existence of financial records are investigated and verified by the audit team and the
entire procedure is known as a financial audit. A financial audit is a type of audit that provides reasonable assurance, and not absolute assurance, to the shareholders of the company that the financial statements prepared by the management provide a true and fair view of the financial position of the company. It is the highest assurance of audit, yet the auditor could not
provide 100% assurance or confidence that there is no material misstatement in the financial statements. For example, an audit might not be able to detect the fraud that is committed by company staff or group of staff whether the result of fraud might materially impact the financial statements. Generally, all the listed companies are required by law to publish their annual financial statements along with the
auditor’s report to the public. This allows all the stakeholders, including the public, to read and analyze the financial statements before making any stock investments. Hence, Financial Audit is a process where the external auditors that are hired by the shareholders over the annual general meeting inspect, navigate and evaluate all the financial records of the company for the
current year and issue an opinion based on their findings. A clean auditor’s opinion means the financial statements prepared by the company’s management portray a true and fair view of the company’s financial statements and are as per the International Financial Reporting Standards (IFRS). On the contrary, in case of a scope limitation or material misstatement due to fraud or error, the auditor issues an unclean opinion in their report. Other than financial audit also known as statutory audit and external audit, the other type of audit services include:
What is the assurance?Assurance is the process of analyzing the processes, controls, and operations of an organization and verifying its accuracy. Assurance services provide a critical assessment of the procedures used in the preparation of accounting and financial records. Auditing is a type of assurance service towards the accuracy of financial statements. As compared to a statutory audit which is compulsory for specific companies by law, the other companies that aren’t obliged to get an external audit use assurance services for their financial records. Assurance services can be obtained for any regulation or compliance. It can be for internal controls, IT systems, financial forecasting, and other procedures or departments that are intact in the company. Assurance services are independent services offered to provide confidence to the stakeholders that the organization is following the guidelines, rules, and policies accurately. A report is provided after a thorough walk-through and analysis which focuses on how the procedures can be improved to ensure accurate financial information is produced by the company. Conclusion:Audit and assurance work hand in hand if it is a statutory audit. A statutory audit is a type of assurance service regarding the accuracy of financial statements. However, audit procedures such as risk assessment and analysis of internal controls of the company come under assurance services. 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:
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. Assurance ServicesAfter 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:
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 AssuranceThe notable differences between audit and assurance are as follows:
Final WordsIn 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. What is the role of auditing?The role of the auditor or reviewer is to give a professional and independent on these financial statements. The review or audit of an association's financial report can ensure greater accountability to the members and provide an assurance that all funds received by the organisation have been correctly accounted for.
Is auditing a good career?Salaries are good
Internal audit is a sustainable, and lucrative career path. The average entry-level salaries in the industry range from being good to great. As an internal auditor with up to one year experience you could be making anywhere from $55,849 – $103,970 USD or an average salary of $42,000-86,000 CAD.
What is done in audit and assurance?conducting risk analysis; developing your client communication skills; preparing financial statements; and. identifying where systems may be failing and recommending controls.
What is the job of assurance?Assurance plays a key role in protecting and promoting sustainable, long-term value. Whether it's building trust and confidence through audit, helping companies tackle climate change reporting challenges, or supporting integrity in business, Assurance helps us to build a better working world.
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