Assurance Services

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21 Aug, 2024

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Assurance services represent a specialized category of professional services, often delivered by certified or chartered accountants, with certified public accountants (CPAs) being a prominent example. It is an examination of a company's financial statements and other documents to ensure that there aren't any discrepancies in them.

It further assures the company that it is using and publicizing accurate information. The primary purpose of assurance services is to receive an unbiased review of documents, company operations, and processes. Information accuracy enables the company to make quality decisions and also helps minimize information risk. It can further increase the reliability and transparency of the company in the market.

What Are Assurance Services?

Assurance services are provided to verify financial statements' accuracy and legal validity, documents, protocols, policies, and procedures. Further, it reviews the business operations and processes.
The main goal of these services is to understand the reliability of information for the sake of the organization and its stakeholders – creditors, investors, and customers.
The assurance should be offered by certified practitioners like CPAs (firms or individuals), who strictly adhere to the International Framework for Assurance Engagements.

Assurance Services Explained

Assurance services in auditing assure the company that the documents, financial statements, transactions, websites, and other information surrounding the organization are accurate and of the highest quality. In this digital era, information is critical, and the one who holds the most information is the richest. Therefore, the company's information must be 100% accurate.

Firstly, organizational decision-making depends on data. To make informed decisions, the management has to review the data and gather insights before coming to conclusions. Secondly, organizations have to publicize certain information regarding their operations occasionally. It would be of interest to their stakeholders. If they do not do justice to the information and present false data, it can harm the company if third parties detect it.

Information risk arises from inaccurate policies, procedures, and standards data that can negatively impact the company and its stakeholders. Information risk is so common and harmful that companies invest highly to alleviate such occurrences. Quality assurance services work on this data and check its accuracy, relevance, and transparency.

These services are usually provided by independent certified professionals or practitioners like certified public accountants (CPAs). Companies offering these services include Ernst & Young (EY), Deloitte, and PricewaterhouseCoopers (PwC). The objective of using reliable third parties is to receive unbiased opinions and get a fresh perspective that is not prone to the same mistakes as the company's accountants.

Assurance services can be provided to help assess risk management policies, reports, and procedures. Companies are also using these services to review business performance and understand the reliability of information and associated systems. Increasingly, the prominence of e-commerce has become a cause of concern regarding data privacy, security, online safety, data breaches, etc.

Fundamentals

The fundamentals of quality assurance services are the elements or components as listed in the International Framework for Assurance Engagements:

1.	Tripartite Relationship	There are three parties involved in this process. Firstly, the practitioner or the professional who offers the services. The responsible party is the company that needs the assurance. Finally, the users of the information include the stakeholders (investors, customers, etc.).
2.	Subject Matter	The subject matter is what the parties need assurance on. It will be examined and verified for quality and accuracy—for example, transactions, documents, statements, accounts, policies, etc.
3.	Criteria	It is the accepted framework between the parties to compare the subject matter, which includes policies, procedures, laws, and regulations.
4.	Evidence	The primary function of the practitioner is to match the subject matter and the criteria and check for any discrepancies.
5.	Assurance Report	Once the practitioner is assured that there are no issues, they will provide a written report.

Examples

Let us understand the concept better through some hypothetical and real-world examples.

Example #1

Let us consider a scenario where Gordon, a Certified Public Accountant (CPA), has been newly assigned as the professional responsible for verifying documents and conducting a comprehensive review of the operations of Company X. This assignment comes as Company X prepares for its upcoming initial public offering (IPO) scheduled for the following month.

The primary purpose of the assurance was to ensure the company and, most importantly, the prospective investors that the company's papers were clean. Gordon was supposed to conduct the examination and submit his report within a week.

Example #2

PricewaterhouseCoopers (PwC) has secured a significant audit and assurance contract with HSBC on the London Stock Exchange. The contract, set to span a decade from 2024 to 2034, is valued at approximately $1.3 billion. PwC emerged as the preferred choice following a competitive tendering that pitted them against Deloitte.

This milestone underscores PwC's continued commitment to providing audit and assurance services at the highest level, particularly in the challenging landscape of one of the most complex and sizeable audits within the London Stock Exchange. It is worth noting that PwC's reappointment is contingent on annual HSBC shareholder approval, reflecting transparency and accountability in this critical financial function.

Assurance Services vs Audit vs Attestation

Below is a comprehensive comparison table highlighting the key differences between each, outlining their distinct characteristics and purposes.

Basis	Assurance Services	Audit	Attestation
Definition	It ensures no discrepancy in information for the organization and its stakeholders by an independent certified practitioner.	It is an independent examination of financial statements, accounts, and transactions.	It is official verification of a document, process, or fact's truth and legal validity by a third party.
Performed by	Certified independent practitioners conduct it.	Independent external auditors or audit firms typically carry it out.	Third-party attestors conduct it with no personal or professional relationship with the signatories.
Scope	It may encompass financial, legal, and operational aspects.	Primarily financial.	Primarily legal.
Purpose	It helps ensure the accuracy and reliability of information for stakeholders.	It helps in detecting misrepresentations, misinformation, or fraud by company stakeholders.	It helps verify the truth and legal validity of documents, processes, or facts.

Assurance Services vs Non-Assurance Services

The table below dives into each of their unique features and objectives.

Basis	Assurance Services	Non-Assurance Services
Purpose	Assures users by verifying and guaranteeing accuracy and absence of discrepancies in documents, policies, and procedures.	Do not serve the purpose of assurance. Examples include tax services, bookkeeping, and consultation services.
Certification	It is typically provided by certified practitioners who adhere to guidelines such as the International Framework for Assurance Engagements.	It is provided in various forms without specific certification requirements.
Necessities	Subject to specific guidelines and requirements.	Diverse in types and not subject to specific assurance guidelines.

Frequently Asked Questions (FAQs)

1. What are the types of assurance services?

There isn't a universal classification, but assurance services generally encompass activities related to ensuring information accuracy, system efficiency, quality assurance, risk management, reviewing business performance (operations and procedures), and addressing data privacy and security.

2. Is assurance services the same as consulting?

No, assurance services primarily revolve around ensuring information accuracy, quality, and reliability for users, such as stakeholders and investors. In contrast, consulting encompasses a broader range of activities that involve understanding specific organizational challenges, providing expert advice, and developing tailored solutions based on comprehensive information analysis.

3. How often should organizations utilize risk assurance services?

The frequency of seeking risk assurance services should align with an organization's unique needs and circumstances. Some organizations may benefit from periodic risk assessments, while others might require continuous risk management support. The choice should consider industry regulations and the organization's risk profile for a customized approach.