In accounting, audit generally refers to the audit of a financial statement or the inspection of various books of accounts that is usually done by a third party to validate the information of financial statements. Wondering what is assurance in accounting? It is the process of analyzing different processes, controls and operations of a company. Let’s discuss the difference between audit and assurance:
What is Audit in Accounting?
An audit is a process of examining the financial reports, especially the financial statement, of a business that is provided in the annual report. Along with the financial statement, the financial reports include an income statement, balance sheet, statement of change in equity, cash flow statement, explanatory notes and others.
The audit lets you know that whether the information within the financial reports suits the financial position of a company on a certain date or not. The auditors follow the standards of the government to write the audit report. Limited liability companies and all listed companies are generally subject to an annual audit.
An audit can be either internal or external. The types of the audit include:
- Financial Audit
- Compliance Audit
- Operational Audit
You must keep an accurate record of your accounts before an audit as per the accounting standards. For this purpose, you need an accountant. Get in touch with us for managing your finances with our cheap accountants in London.
What is Assurance in Accounting?
In accounting, assurance is the process of examining various processes, operations and procedures of the company to minimize the information risk by enhancing the quality and transparency of the information. It doesn’t strictly focus on the financial aspect of the company, rather its practitioners also look at the internal controls, IT system and other processes in the different departments of the company.
Difference Between Audit and Assurance:
Audit and assurance work side by site. Both processes are used for examining and analyzing the financial record of a business. These processes verify and validate the accounts of a company as per the accounting standard and principle. The audit is specifically done for inspecting the accounting entries of the financial statement. Whereas assurance is done for analyzing the different processes. Moreover, assurance is used for evaluating accounting entries and other financial records. Generally, after a proper audit, assurance is done.
Looking for a professional auditor, contact us right away!
Let’s have a look at some major differences between audit and assurance:
Definition: Audit only evaluates accounting entries that are in the financial statement and checks the accuracy of financial reports. Whereas, assurance analyzes and verifies financial records used in the assessment of accounting entries.
Step: Audit comes first. On the other hand, assurance is done after auditing.
Who do it: Auditing is done by an internal or external auditor. Whereas an audit firm performs assurance.
Purpose: Auditing is done for finding mistakes in financial records and it shows fraud, misuse of fund done in or by the company. On the contrary, assurance improves information quality and is useful for making decisions.
Uses: Auditing checks the accuracy and the reports are as per the accounting standard and principle. On the other side, assurance assures that the financial reports are accurate, it doesn’t show any misrepresentation or misuse or fraud in or by the company.
Quick Sum Up:
So, you have got all the information on what is audit in accounting and what is assurance in accounting. We have also differentiated them for your understanding. For further queries, you may contact us.
Our accountants, at Cheap accountant in London, are well versed with the latest accounting and taxation techniques to manage your finances.
Feel free to reach out!
Disclaimer: This blog provides general information on audit and assurance.