Audit vs. Assurance — What's the Difference?
By Fiza Rafique & Urooj Arif — Updated on April 1, 2024
Audit is a systematic examination of financial records to verify their accuracy, while assurance is a broader term encompassing any service that improves the quality of information for decision-makers.
Difference Between Audit and Assurance
Table of Contents
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Key Differences
An audit, specifically a financial audit, focuses on evaluating the fairness and accuracy of a company's financial statements. This process involves examining evidence to provide an opinion on whether the financial statements are presented accurately, in all material respects, in accordance with applicable financial reporting standards. On the other hand, assurance services include audits but extend to other areas, such as risk assessments, compliance reviews, and performance evaluations of a company. Assurance aims to improve the transparency, relevance, and reliability of information so that stakeholders can make informed decisions.
While an audit is a type of assurance service specifically concerned with financial records and reports, assurance can relate to both financial and non-financial information. For example, assurance services might evaluate the effectiveness of a company's internal controls or its compliance with environmental regulations, areas not typically covered by a traditional financial audit.
The methodology between the two can differ significantly. Audits are performed following specific standards, such as Generally Accepted Auditing Standards (GAAS) in the U.S., which dictate how auditors should plan and execute an audit. Assurance services, however, may follow a broader range of standards and frameworks, depending on the information being assured and the specific goals of the assurance engagement.
The outcome of an audit is typically a report that includes the auditor's opinion on the financial statements. In contrast, assurance services result in a report or conclusion designed to increase confidence among stakeholders in the subject matter at hand, which can vary widely from financial health to compliance with regulations.
Both audit and assurance services play critical roles in enhancing trust and confidence among investors, creditors, and other stakeholders in a company’s financial and operational integrity. However, the scope, objectives, and methodologies of assurance services encompass a wider range than those of audits.
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Comparison Chart
Focus
Accuracy and fairness of financial statements
Quality of information, both financial and non-financial
Scope
Specific to financial records and reports
Broad, including financial statements, compliance, performance, and more
Standards
Generally Accepted Auditing Standards (GAAS), International Standards on Auditing (ISA)
Varies, including GAAS, ISO standards, and others depending on the service
Outcome
Auditor's report with opinion on financial statements
Assurance report or conclusion on the assured information
Primary Goal
Verify the accuracy of financial reports
Improve confidence in the quality of information
Compare with Definitions
Audit
Results in an auditor's opinion.
The audit concluded with an unqualified opinion, indicating clean financial statements.
Assurance
Services that improve the quality of information.
They sought assurance services to enhance stakeholder confidence in their sustainability report.
Audit
Governed by specific standards.
They followed international auditing standards throughout the audit process.
Assurance
Aims to increase confidence among decision-makers.
Assurance services have helped improve investor confidence in the company.
Audit
Examination of financial statements to verify accuracy.
The company undergoes an annual audit to ensure financial transparency.
Assurance
Includes a variety of services.
The firm offers assurance services ranging from risk management to compliance audits.
Audit
Focuses on historical financial information.
The audit will review last year's financial transactions for accuracy.
Assurance
Can be financial or non-financial.
Their assurance engagement included both financial audits and internal control evaluations.
Audit
Conducted by external or internal auditors.
Their internal audit team is assessing financial processes for efficiency.
Assurance
Results can vary based on the engagement.
The assurance report on compliance with environmental regulations was very positive.
Audit
An audit is an "independent examination of financial information of any entity, whether profit oriented or not, irrespective of its size or legal form when such an examination is conducted with a view to express an opinion thereon.” Auditing also attempts to ensure that the books of accounts are properly maintained by the concern as required by law. Auditors consider the propositions before them, obtain evidence, and evaluate the propositions in their auditing report.Audits provide third-party assurance to various stakeholders that the subject matter is free from material misstatement.
Assurance
A statement or indication that inspires confidence; a guarantee or pledge
Gave her assurance that the plan would succeed.
Audit
An examination of records or financial accounts to check their accuracy.
Assurance
Freedom from doubt; certainty about something
Do you have any assurance that the work will be done well?.
Audit
An adjustment or correction of accounts.
Assurance
Self-confidence
"I tried imitating the assurance they carried themselves with" (Alec Wilkinson).
Audit
An examined and verified account.
Assurance
Chiefly British Insurance, especially life insurance.
Audit
A thorough examination or evaluation
An audit of water use.
Assurance
The act of assuring; a declaration tending to inspire full confidence; something designed to give confidence.
Audit
To examine, verify, or correct the financial accounts of
Independent accountants audit the company annually. The IRS audits questionable income tax returns.
Assurance
The state of being assured; total confidence or trust; a lack of doubt; certainty.
Audit
To attend (a course) without requesting or receiving academic credit.
Assurance
Firmness of mind; undoubting steadiness; intrepidity; courage; confidence; self-reliance.
Audit
To examine or evaluate (something) thoroughly
Audit a house's energy consumption.
Assurance
Excessive boldness; impudence; audacity
His assurance is intolerable
Audit
To conduct an audit.
Assurance
(obsolete) Betrothal; affiance.
Audit
A judicial examination.
Assurance
(legal) Any written or other legal evidence of the conveyance of property; a conveyance; a deed.
Audit
An examination in general.
Assurance
(theology) Subjective certainty of one's salvation.
Audit
An independent review and examination of records and activities to assess the adequacy of system controls, to ensure compliance with established policies and operational procedures, and to recommend necessary changes in controls, policies, or procedures
National Assembly audit
Assurance
The state of being assured; firm persuasion; full confidence or trust; freedom from doubt; certainty.
Let us draw with a true heart in full assurance of faith, having our hearts sprinkled from an evil conscience.
Audit
The result of such an examination, or an account as adjusted by auditors; final account.
Assurance
Firmness of mind; undoubting, steadiness; intrepidity; courage; confidence; self-reliance.
Brave men meet danger with assurance.
Conversation with the world will give them knowledge and assurance.
Audit
(Scientology) Spiritual counseling, which forms the core of Dianetics.
Assurance
Excess of boldness; impudence; audacity; as, his assurance is intolerable.
Audit
(obsolete) A general receptacle or receiver.
Assurance
Betrothal; affiance.
Audit
(obsolete) An audience; a hearing.
Assurance
Any written or other legal evidence of the conveyance of property; a conveyance; a deed.
Audit
To examine and adjust (e.g. an account).
To audit the accounts of a treasure, or of parties who have a suit depending in court
Assurance
Freedom from doubt; belief in yourself and your abilities;
His assurance in his superiority did not make him popular
After that failure he lost his confidence
She spoke with authority
Audit
To conduct an independent review and examination of system records and activities in order to test the adequacy and effectiveness of data security and data integrity procedures, to ensure compliance with established policy and operational procedures, and to recommend any necessary changes
Assurance
A binding commitment to do or give or refrain from something;
An assurance of help when needed
Signed a pledge never to reveal the secret
Audit
(Scientology) To counsel spiritually.
Assurance
A statement intended to inspire confidence;
The President's assurances were not respected
Audit
To attend an academic class without the opportunity to receive academic credit.
Assurance
A British term for some kinds of insurance
Audit
An audience; a hearing.
He appeals to a high audit.
Audit
An examination in general; a judicial examination.
Audit
The result of such an examination, or an account as adjusted by auditors; final account.
Yet I can make my audit up.
Audit
A general receptacle or receiver.
It [a little brook] paid to its common audit no more than the revenues of a little cloud.
Audit
To examine and adjust, as an account or accounts; as, to audit the accounts of a treasure, or of parties who have a suit depending in court.
Audit
To settle or adjust an account.
Let Hocus audit; he knows how the money was disbursed.
Audit
An inspection of the accounting procedures and records by a trained accountant or CPA
Audit
A methodical examination or review of a condition or situation;
He made an audit of all the plants on his property
An energy efficiency audit
An email log audit
Audit
Of accounts and tax returns; with the intent to verify
Audit
Attend academic courses without getting credit
Common Curiosities
What is the main difference between an audit and assurance?
An audit is a detailed examination of financial records for accuracy, while assurance is a broader service aimed at improving information quality for decision-making.
Can an audit be considered an assurance service?
Yes, an audit is a type of assurance service focused on financial statements.
How do standards for audit and assurance differ?
Audit standards are specific, like GAAS or ISA, focusing on financial audits. Assurance standards can vary widely, including those and others like ISO, depending on the assurance service.
Who can provide assurance services?
Certified professionals, such as CPAs or auditors with relevant expertise, provide assurance services, ensuring they meet required standards and ethics.
What types of companies need audit and assurance services?
Both public and private companies, non-profits, and government entities can benefit from audit and assurance services to validate their information and operations.
Can assurance services prevent fraud?
While not specifically aimed at fraud prevention, assurance services can improve controls and processes, thereby reducing the risk of fraud.
What does an auditor look for during an audit?
Auditors examine financial records and transactions for accuracy, compliance with standards, and ensure that financial statements are free from material misstatement.
Are assurance services only for financial information?
No, assurance services can cover both financial and non-financial information, such as compliance with regulations or the effectiveness of internal controls.
Is internal auditing an assurance service?
Yes, internal auditing is an assurance activity aimed at improving an organization's operations and governance processes.
How often should a company undergo an audit or assurance service?
It depends on legal requirements, stakeholder demands, and the company’s own policies. Many companies conduct annual audits.
Can assurance services cover environmental and sustainability reports?
Yes, assurance services can assess the accuracy and reliability of environmental and sustainability reporting.
What's the outcome of an assurance service?
The outcome is a report or conclusion designed to increase stakeholders' confidence in the assessed information, which can be financial health, compliance, or performance metrics.
Why are assurance services important?
They play a critical role in ensuring the reliability of information, helping stakeholders make informed decisions based on accurate and trustworthy data.
How can assurance services benefit small businesses?
They can enhance the credibility of financial information, improve processes, and increase confidence among investors, creditors, and other stakeholders.
Do all businesses require an audit?
Not all businesses are legally required to undergo an audit; requirements vary by country, business size, and type.
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Written by
Fiza RafiqueFiza Rafique is a skilled content writer at AskDifference.com, where she meticulously refines and enhances written pieces. Drawing from her vast editorial expertise, Fiza ensures clarity, accuracy, and precision in every article. Passionate about language, she continually seeks to elevate the quality of content for readers worldwide.
Co-written by
Urooj ArifUrooj is a skilled content writer at Ask Difference, known for her exceptional ability to simplify complex topics into engaging and informative content. With a passion for research and a flair for clear, concise writing, she consistently delivers articles that resonate with our diverse audience.
