Assurance is one of the oldest forms of commercial insurance. It is often referred to as the “life insurance of commercial insurance.” In simple terms, assurance service is an independent specialist service, usually offered by Certified or Chartered Public Accountants or Chartered Accountants, with the primary aim of enhancing the context or data of a commercial matter so that better decision-makers can make wiser, more informed choices. This form of assurance focuses on both quality assurance and cost assurance.
Quality assurance jobs are growing in popularity as accountancy and audit jobs become more competitive and auditors’ roles grow in importance. This popularity is understandable: the expanding global economy means that firms must operate more efficiently and profitably and accountancy and audit professionals are an integral part of this efficiency and profitability. To help them do this, accountants and auditors must be able to deliver quality assurance. This means that the information they are checking against in assessing a commercial matter has to be accurate. The purpose of this assurance is not just to find errors or anomalies (which are sometimes considerable), but to bring about necessary improvements in the organisation in areas such as management effectiveness, corporate governance and financial risk management.
How does assurance work? An internal auditor is someone who works within an organisation as an independent consultant, providing assurance, either complete or partial, that a business’s financial statements and reports are correct and complete. This “assurance” is a key part of the auditor’s professional role. An internal audit should not be seen as a way of rubber-stamping the results of an audit – this is contrary to the spirit of good practice and can undermine the reputation of the organisation and the professionalism of the individual who carried out the audit. Internal audit should be seen as a way of helping to build the credibility and reputation of the organisation and of the individual whose job it is to ensure that the organisation is achieving its objectives.
There are many examples of assurance in the accountancy field. Examples include assurance about the preparation of financial statements and reports, assurance about the compliance of an organisation with regulatory requirements, assurance regarding the generation and presentation of accounting records, assurance regarding the generation and accessibility of financial information, assurance about the provision of accounting advice and assistance and assurance regarding the provision of fraud control measures. Whilst it can sometimes be seen as redundant within many accountancy firms, these are all areas in which accountancy firms can and do provide significant assurance.
Why should accountancy firms carry on their assurance activities? Firstly, assurance allows agencies and individuals to recognise and report irregularities and weaknesses in the organisation, enabling them to make changes where needed. Secondly, assurance creates a positive perception in the marketplace, encouraging agencies and individuals to raise questions about the organisation’s performance and methodology if their results are below expected standards. Thirdly, assurance can work to protect the reputation of the company, giving clients confidence in their organisations and in the products or services provided. This can work to improve both the bottom line and the quality of the service provided. Finally, financial assurance jobs create a strong link between an individual agency and its customer base.
What does assurance actually mean? The process of assurance can vary considerably, depending on the function of the entity involved. Within an accounting firm, it might mean a thorough examination and review of an individual accountant’s audit reports. It might also mean a complete overhaul of an internal audit procedure, moving it from an annual audit to a semi-annual audit and review, or even moving it to a semi-annual audit and inquiry. In this latter example, the internal auditor would carry out the audit as part of the company’s assurance policy. An audit is conducted to identify areas where the business can improve to boost its competitiveness and its chances of success.
Within an organisation, assurance can mean the preparation and submission of accounts which are robust enough to withstand scrutiny by any of its many competitors. The need for this high level of quality is especially important in the world of financial information, where accounting reviews and auditor reports are often comparing with other companies to ensure that their financial statements are comparable. To this end, many companies rely on large, reputable accountancy firms to carry out the audits that they need.
However, many accountancy firms also offer assurance services. This is not the same as the audits that most accountancy firms carry out – these tend not to be independent nor do they compare with independent auditors. Instead, assurance services involve performing reviews of the financial reporting that the company has submitted to various external organisations. These quality audits can include assessing the accuracy of the information provided, or the reliance that it has on external sources.