In the field of business, you might have heard of the terms “audit” and “assurance”. They usually work hand in hand. Auditing is the process of looking at the company’s financial statements, internal processes, and other areas of concern.
Assurance, on the other hand, is where an external entity (not with the company) analyzes the report that is made by the auditor and they will use that data in assessing the company’s financial records and accounting entries. You could say that Assurance happens after an audit takes place.
In today’s article, I will go over their key differences, seeing that not a lot of people know about them when used in a singular sense. While you read through the article, I suggest that you find audit services in Malaysia since they offer pretty good work and have some solid reviews based on happy clients.
Anyway, without further ado, what are the key differences between audit and assurance?
A company that is running through its normal course would be able to generate financial reports. In the event that they need funding, for example, they would have to conduct external audits to make their companies more appealing to potential investors. Or, the audit can be used to help them make important decisions for their company moving forward.
As mentioned earlier, auditing is just the process of evaluating all of the organization’s financial data to arrive at a conclusion. The best way to do this would be to have it done with an external auditing firm to avoid biases and so that the report remains as objective as possible.
An audit will tell the company owner and potential investors if there is any misrepresentation that is done in the financial reports or if there are any misuse of funds, and the detection of possible fraud.
As the name implies, an assurance is basically evaluating the auditing report and see if it is indeed authentic and in-line with the business’ financial data. In other words, assurance is the assessment of the company’s business processes, operations, internal procedures, etc.
The main objective of Assurance is just to check the validity and accuracy of external audits.
Now that we have come to the most enjoyable part, here are the key differences between assurance and audit:
- An audit will help company owners know if there are any misrepresentation and fraud that is happening within the organization. An assurance is where it assesses the quality of information of the audit
- An audit is usually done first and the assurance is second. The latter is used to help validate the previous one’s report
- Auditing, in general, can either be done in-house (from company employees) and from an external firm (auditing or accounting firm). Assurance is only done by external entities
- Auditing is the thorough checking of all business processes within the organization. Aside from checking financial reports, it also takes into account the different processes that are happening inside. Furthermore, auditors may give advice on how things can be improved even further.