Assurance services
Encyclopedia
Assurance service is an independent professional service, typically provided by CPAs
, with the goal of improving the information or the context of the information so that decision makers can make more informed, and presumably better decisions. Assurance services provide independent and professional opinions that reduce the information risk (risk that comes from incorrect information).
s can be considered a type of assurance service. However audits are only designed to test the validity of the financial statement
s. Under an assurance engagement, accountants can provide a variety of services ranging from information systems security reviews to customer satisfaction
surveys. Unlike audit and attestation
services that are often highly structured, assurance services tend to be customized and implemented when performed for a smaller group of decision makers within the firm. Often managers must make decisions on things they have incomplete or inaccurate data for, and decisions made on such data may be incorrect and increase the overall business risk. In this respect, assurance services can be very helpful in reducing such risk and help managers or decision makers make more confident decisions within a given firm. This is similar to audits in that investors will choose to invest in a firm that is publishing financial statements that have been audited by an independent firm.
Assurance services can test financial and non-financial information; due to this assurance services can be classified as consulting services. However, assurance services are not considered consulting because in consulting services generally, an accountant uses their professional knowledge to make recommendations for a future event or a procedure, such as the design of an information system or accounting control system. In contrast, assurance services are designed to test the validity of past data of the business cycles. Although there is no boundary to what an accountant can test in assurance services, a practitioner is discouraged from accepting an assurance engagement in which his firm or previous experiences does not provide them with enough expertise to make a professional opinion on the given data.
Assurance services done by accountants differ from nonassurance services
.
Other examples of assurance services include:
Certified Public Accountant
Certified Public Accountant is the statutory title of qualified accountants in the United States who have passed the Uniform Certified Public Accountant Examination and have met additional state education and experience requirements for certification as a CPA...
, with the goal of improving the information or the context of the information so that decision makers can make more informed, and presumably better decisions. Assurance services provide independent and professional opinions that reduce the information risk (risk that comes from incorrect information).
Types of assurance service
AuditAudit
The general definition of an audit is an evaluation of a person, organization, system, process, enterprise, project or product. The term most commonly refers to audits in accounting, but similar concepts also exist in project management, quality management, and energy conservation.- Accounting...
s can be considered a type of assurance service. However audits are only designed to test the validity of the financial statement
Financial statement
A financial statement is a formal record of the financial activities of a business, person, or other entity. In British English—including United Kingdom company law—a financial statement is often referred to as an account, although the term financial statement is also used, particularly by...
s. Under an assurance engagement, accountants can provide a variety of services ranging from information systems security reviews to customer satisfaction
Customer satisfaction
Customer satisfaction, a term frequently used in marketing, is a measure of how products and services supplied by a company meet or surpass customer expectation...
surveys. Unlike audit and attestation
Attestation
Attestation may refer to:* Attestation clause, verification of a document* Various police oaths in the United Kingdom...
services that are often highly structured, assurance services tend to be customized and implemented when performed for a smaller group of decision makers within the firm. Often managers must make decisions on things they have incomplete or inaccurate data for, and decisions made on such data may be incorrect and increase the overall business risk. In this respect, assurance services can be very helpful in reducing such risk and help managers or decision makers make more confident decisions within a given firm. This is similar to audits in that investors will choose to invest in a firm that is publishing financial statements that have been audited by an independent firm.
Assurance services can test financial and non-financial information; due to this assurance services can be classified as consulting services. However, assurance services are not considered consulting because in consulting services generally, an accountant uses their professional knowledge to make recommendations for a future event or a procedure, such as the design of an information system or accounting control system. In contrast, assurance services are designed to test the validity of past data of the business cycles. Although there is no boundary to what an accountant can test in assurance services, a practitioner is discouraged from accepting an assurance engagement in which his firm or previous experiences does not provide them with enough expertise to make a professional opinion on the given data.
Assurance services done by accountants differ from nonassurance services
Nonassurance services
Nonassurance services provided by CPAs include accounting and bookkeeping services, tax services, and management consulting services. Nonassurance services differ from assurance services...
.
Other examples of assurance services include:
- Accounts receivableAccounts receivableAccounts receivable also known as Debtors, is money owed to a business by its clients and shown on its Balance Sheet as an asset...
review - Business risk assessmentRisk assessmentRisk assessment is a step in a risk management procedure. Risk assessment is the determination of quantitative or qualitative value of risk related to a concrete situation and a recognized threat...
- Comfort letterComfort LetterA comfort letter is a document prepared by an accounting firm assuring the financial soundness or backing of a company. The comfort letter can be issued by a CPA declaring no indication of false or misleading information in the financial statements and that the company's prospectus follows GAAP....
- Customer satisfactionCustomer satisfactionCustomer satisfaction, a term frequently used in marketing, is a measure of how products and services supplied by a company meet or surpass customer expectation...
survey - Information systems security review
- Internal auditInternal auditInternal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk...
outsourcingOutsourcingOutsourcing is the process of contracting a business function to someone else.-Overview:The term outsourcing is used inconsistently but usually involves the contracting out of a business function - commonly one previously performed in-house - to an external provider...