An audit engagement involves the objective examination and evaluation of an organization’s financial statements to ensure their accuracy and compliance with accounting standards (SVA, 2024). In contrast, an assurance engagement focuses on providing a broader assessment of information, including financial statements, to enhance the confidence of stakeholders in its reliability and authenticity (IAASB, 2017).
Key Facts
- An audit engagement involves the objective examination and evaluation of an organization’s financial statements to ensure they are a true and fair representation of the transactions they claim to represent.
- The purpose of an audit is to provide reasonable assurance to stakeholders, such as shareholders, lenders, and regulators, that the financial statements are reliable and comply with applicable accounting standards.
- Auditors use specific techniques and procedures to obtain evidence and form an opinion on the financial statements.
- The auditor’s conclusion is communicated in an assurance report, which states whether the financial statements give a true and fair view.
- Audit engagements are typically performed by external auditors who are independent of the organization being audited.
Assurance Engagement:
- An assurance engagement involves the practitioner expressing a conclusion designed to enhance the degree of confidence of the intended users, other than the responsible party, about the outcome of the evaluation or measurement of a subject matter against criteria.
- The purpose of an assurance engagement is to provide assurance to stakeholders about the reliability, authenticity, and correctness of information, beyond just financial statements.
- Assurance engagements can cover a wide range of areas, such as the effectiveness of internal controls, IT systems, due diligence reporting, and review of grant claims.
- Assurance engagements can be performed by independent professionals who provide assurance services to improve the quality of information available to decision-makers.
- The assurance report communicates the practitioner’s conclusion or expression of opinion on the subject matter being evaluated.
Purpose and Scope
The primary purpose of an audit is to provide reasonable assurance that financial statements present a true and fair view of an organization’s financial position and performance (SVA, 2024). Auditors use specific techniques and procedures to gather evidence and form an opinion on the financial statements. This opinion is communicated in an assurance report, which states whether the financial statements are materially correct and compliant with applicable accounting standards (SVA, 2024).
On the other hand, assurance engagements are broader in scope and can cover a wide range of areas beyond financial statements (YH TAN & ASSOCIATES PLT, 2023). These engagements aim to provide assurance on the effectiveness of internal controls, IT systems, due diligence reporting, and other aspects of an organization’s operations (YH TAN & ASSOCIATES PLT, 2023).
Independence and Objectivity
Audit engagements are typically performed by external auditors who are independent of the organization being audited (SVA, 2024). This independence ensures that the auditor can provide an unbiased opinion on the financial statements. In contrast, assurance engagements can be performed by both internal and external professionals (YH TAN & ASSOCIATES PLT, 2023).
Conclusion and Reporting
The auditor’s conclusion in an audit engagement is expressed in the form of an opinion on the financial statements (SVA, 2024). This opinion can be unqualified (giving a true and fair view), qualified (with certain exceptions), adverse (not giving a true and fair view), or a disclaimer of opinion (insufficient evidence to form an opinion).
In an assurance engagement, the practitioner expresses a conclusion or opinion on the subject matter being evaluated (IAASB, 2017). This conclusion can be positive (providing assurance that the subject matter is accurate and reliable) or negative (expressing concerns or limitations in providing assurance).
Benefits and Value
Both audit and assurance engagements provide valuable benefits to organizations and stakeholders. Audits enhance the credibility and reliability of financial statements, which is essential for investors, lenders, and other external parties (SVA, 2024). Assurance engagements improve the quality of information available to decision-makers, helping them make informed judgments and mitigate risks (YH TAN & ASSOCIATES PLT, 2023).
Sources
- Audit and Assurance Services
- Difference between Audit and Assurance Services
- Assurance vs Audit: What is the Difference?
- International Framework for Assurance Engagements
FAQs
What is the primary purpose of an audit engagement?
**Answer:** To provide reasonable assurance that financial statements present a true and fair view of an organization’s financial position and performance.
What is the scope of an assurance engagement?
**Answer:** Assurance engagements cover a wider range of areas than audits, including the effectiveness of internal controls, IT systems, due diligence reporting, and other aspects of an organization’s operations.
Who typically performs audit engagements?
**Answer:** External auditors who are independent of the organization being audited.
Who can perform assurance engagements?
**Answer:** Both internal and external professionals.
What is the auditor’s conclusion in an audit engagement?
**Answer:** An opinion on the financial statements, which can be unqualified, qualified, adverse, or a disclaimer of opinion.
What is the practitioner’s conclusion in an assurance engagement?
**Answer:** A conclusion or opinion on the subject matter being evaluated, which can be positive or negative.
What are the benefits of an audit engagement?
**Answer:** Enhanced credibility and reliability of financial statements for investors, lenders, and other external parties.
What are the benefits of an assurance engagement?
**Answer:** Improved quality of information available to decision-makers, helping them make informed judgments and mitigate risks.