What are Assurance Work and Its Significance?
Assurance service is basically an independent specialist service, usually offered by Certified or Chartered Public Accountants or Chartered Accountants, to the benefit of policyholders, usually with the aim of enhancing the context or data so that decisions can be made more wisely, and hopefully more cheaply. This includes assurance services for landlords, homeowners, car insurers, life insurance, employers and public bodies. The most commonly quoted areas in which assurance is offered include tax, litigation support, contract protection, regulatory, compliance and audit support.
There are many ways in which accountancy firms can provide assurance services. The most common types include assurance of completeness and correct financial information and provision of audits. There are two types of assurance, namely, financial summary and assurance of completeness. Financial summary assurance provides the key balances and other relevant financial information on an accounting period. A thorough accounting practice incorporates a wide variety of techniques, such as internal and external audits.
An internal auditor, also called a certified public accountant, is a professional who is either commissioned by an organisation or employed by one of the organisations that it represents. The internal auditor’s main function is to review the effectiveness of the management of the organisation’s policies and practices, and the operation of its internal controls. The objective of the internal audit is to provide the CPA with reliable and accurate external reports on the functioning of the organisation. Internal audits are sometimes also undertaken by the CPA when he is requested to inspect or test specific procedures, or to investigate the cause of a particular incidence.
There are two main types of assurance provided by an external auditor. They are management assurance of compliance. Management assurance is the opposite of compliance assurance. In the former, the assurance is that the organisation has effective and efficient policies and practices in place to comply with the requirements of the resolutions of the internal audit. The objective of this assurance is to ensure that the organisation can meet the regulatory and supervisory requirements set out by the resolutions.
Compliance assurance is different to management assurance. In the former, the assurance is that the policies and practices of the organisation will be held to the highest standards possible in order to ensure that the CPA can provide reliable and accurate supervisory and audit services. As regards quality, this is related to both quality management principles, which are designed to achieve the achievement of high quality control. Supervisory principles refer to the principles governing the relationship between the CPA and his/her client organisation. These include principles relating to integrity, ethics, knowledge transfer, communication, quality control and other areas. This assurance relates to the delivery of the best supervisory and audit services, and therefore requires strong commitment, effective and efficient communication, and the ability to demonstrate competence.
The term assurance can also have a more specific meaning in the context of internal audit. In order to qualify as an assurance of internal audit, a CPA must have completed the CPA examination. The examination requires passing an examination covering a large number of issues dealing with accounting principles, auditing practice, principles of accounting and Auditing Standards. There are several other requirements for certification by one of the three professional bodies, the Institute of Chartered Accountants in England (ICCA / Chartered Certified Accountant), the Society of Chartered Accountants in Scotland (SCAN Scotland) or the Institute of Chartered Accountants in Wales (ICAW / ICAW). In order to meet the additional requirement of the Special Assurance Program, an individual needs to have at least five years experience in a similar role. For individuals who hold auditing responsibilities, assurance is a key requirement.
A key function of assurance is to provide clients and internal controls with assurance regarding the completeness and accuracy of the information contained in the financial statements and reports. It is the responsibility of the assurance provider to perform due diligence and conduct adequate investigations of the procedures followed by management in assessing the risk of errors and omissions. It is the further responsibility of the assurance provider to perform timely and periodic evaluation of the effectiveness of internal controls. Auditors try to identify any weaknesses in the control system that could result in errors or incomplete information, which would then allow the control system to be made more effective.
The assurance that comes with assurance providers is important to the financial reporting process because it serves as a proof that the processes undertaken by the company to meet the requirements of the regulatory body. An organization that is confident enough to provide support for its auditors ensures that the regulatory body is able to rely on the company to provide reports that are free from errors. This assurance also acts as a deterrent to organizations that might want to take advantage of the regulatory body’s need for assurance. The assurance that the company provides supports the continued operation of the financial reporting process and the assurance also helps to guarantee the financial stability of the organization.