The key difference between an Audit and Assurance is that an audit is the systematic examination of the books of accounts and the other documents of the company to know whether the statement shows a true and fair view of the organization. In contrast, assurance is how the different processes, procedures, and operations are analyzed.
Difference Between Audit vs Assurance
Audit and assurance are processes used for the evaluation of the financial record of the company. They are hand-in-hand processes. Audit and assurance are the processes of verifying the records available in the company’s accounting record as per accounting standard and principleAccounting Standard And PrincipleAccounting principles are the set guidelines and rules issued by accounting standards like GAAP and IFRS for the companies to follow while recording and presenting the financial information in the books of accounts.read more, It also confirms whether the accounting record is accurate. The audit is the process of evaluating the accounting entries present in the company’s financial statement. Assurance is the process of analyzing and using it to assess accounting entriesAccounting EntriesAccounting Entry is a summary of all the business transactions in the accounting books, including the debit & credit entry. It has 3 major types, i.e., Transaction Entry, Adjusting Entry, & Closing Entry. read more and financial records. An audit usually follows assurance.
This article looks at the top differences between Audit vs. Assurance.
Table of contents
What is an Audit?
The audit is the process of evaluating the accounting entries present in the company’s financial statement. The audit checks the accuracy of financial reports. Auditing includes making sure ethically presented, fairly presented, and accurate, and it also checks whether financial reports are as per accounting standards and principles. In addition, the audit tells about any misrepresentation done in financial records, any misuse of funds, any fraud, and any fraudulent activities done in a company or done by the company. Internal auditors and external auditors conduct the audits who are independent auditors.
The employee of the company conducts an internal audit and belongs to the company’s audit department. The internal auditInternal AuditInternal audit refers to the inspection conducted to assess and enhance the company's risk management efficacy, evaluate the different internal controls, and ensure that the company adheres to all the regulations. It helps the management and board of directors to identify and rectify the loopholes before the external audit.read more audits frequently and checks the record of the financial reportFinancial ReportFinancial reporting is a systematic process of recording and representing a company’s financial data. The reports reflect a firm’s financial health and performance in a given period. Management, investors, shareholders, financiers, government, and regulatory agencies rely on financial reports for decision-making.read more, whether records are per accounting standards and accounting principles, and monitors and verifies whether the accounting record is accurate. The company also hires external auditors who provide an unbiased report of the financial statements. Many auditing firms are available that act as external auditors for many firms. The reports that these firms prepare are considered accurate and provide a true and fair representation of the company’s financial status.
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Video Explanation of Audit vs Assurance
What is Assurance?
Assurance is the process of analyzing and using it to assess accounting entriesAccounting EntriesAccounting Entry is a summary of all the business transactions in the accounting books, including the debit & credit entry. It has 3 major types, i.e., Transaction Entry, Adjusting Entry, & Closing Entry. read more and financial records. Assurance is verifying the records available in the company’s accounting record as per accounting standards and principles. It also confirms whether the accounting record is accurate. Assurance is the assessing process, operations, procedure, etc. The main aim of assurance is to check the accuracy of financial reports. It also assures all the stakeholders that there is no misrepresentation done in financial records, no misuse of funds, no fraud, and no fraudulent activities done in a company or done by the company. Assurance check financial reports are as per accounting standards and accounting principles. Assurance is applied to assess the process, the procedure, and operations, and these processes, procedures, and systems are observed closely to ensure the process is right and gives optimum results. Assurance specializes in assessing and improving the quality of the information in a company. It helps in decision making in an organization as it works on customer feedback, financial informationFinancial InformationFinancial Information refers to the summarized data of monetary transactions that is helpful to investors in understanding company’s profitability, their assets, and growth prospects. Financial Data about individuals like past Months Bank Statement, Tax return receipts helps banks to understand customer’s credit quality, repayment capacity etc.read more, employee feedback, or areas where information is required in decision making an organization.
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Audit vs. Assurance Infographics
Here we provide you with the top 5 differences between Audit vs. Assurance.
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Audit vs. Assurance– Key Differences
The critical differences between Audit vs. Assurance are as follows –
- The audit is the process of evaluating the accounting entries present in the company’s financial statementCompany's Financial StatementFinancial statements are written reports prepared by a company's management to present the company's financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels.read more. Audit checks the accuracy of financial reports, whereas Assurance is the process of analyzing and assessing accounting entries and financial records. Assurance also verifies the records available in the company’s accounting record as per accounting standards and principles, and it also verifies whether the accounting record is accurate.
- The audit tells about any misrepresentation done in financial records, any misuse of funds, any fraud, and any dishonest activities done in a company or done by the company. In contrast, Assurance specializes in assessing and improving the quality of the information in a company. It helps in decision-making in an organization.
- The audit is the first step, followed by assurance.
- The audit is done by an internal or external auditor, whereas an audit firm does Assurance.
- Auditing includes making sure ethical presentation is fairly presented and accurate, and it also checks whether financial reports are as per accounting standards and principles. In contrast, assurance is used to verify the accuracy of financial reports. It also assures all the stakeholders that there is no misrepresentation done in financial records, no misuse of funds, no fraud, and no dishonest activities done in a company or done by the company.
Audit vs. Assurance Head to Head Difference
Let’s now look at the head-to-head difference between Audit vs. Assurance.
| Basis – Audit vs. Assurance | Audit | Assurance |
|---|---|---|
| Definition | The audit is the process of evaluating the accounting entries present in the financial statement of the company. The audit checks the accuracy of the financial reports. | Assurance is the process of analyzing and used in the assessment of accounting entries and financial records. Assurance is a process of verifying the records available in the company’s accounting record as per accounting standard and principle, and it also verifies that the accounting record is accurate or not. |
| Step | The audit is the first step. | Assurance if followed by the audit. |
| Done by | An internal auditor or external auditor does the audit; | An audit firm does assurance. |
| Aim | The audit tells about any misrepresentation done in financial records, any misuse of funds, any fraud, and any fraudulent activities done in a company or done by the company. | Assurance specializes in assessing the improving the quality of the information in a company. It helps in decision making in an organization. |
| Uses | Auditing includes making sure ethically presented, fairly presented, accurate, and it also checks whether financial reports are as per accounting standard and accounting principle. | The use of Assurance is to check the accuracy of financial reports. It also assures all the stakeholders that there is no misrepresentation done in financial records, no misuse of funds, no fraud, and no fraudulent activities done in a company or done by the company. |
Conclusion
Audit vs. assurance is a hand in hand process used for evaluation of the financial record of the company. Auditing includes making sure ethically presented, fairly presented, and accurate. It also checks whether accounting reportsAccounting ReportsAccounting reports are created using a company's accounting data to check ledger-by-ledger transactions over a given time period. Accounting reports also include financial statements such as cash flow statements, profit and loss statements, and balance sheets.read more are as per standard and accounting principles. Assurance checks there is no misrepresentation done in financial records, no misuse of funds, no fraud, and no fraudulent activities done and informs the same to all company stakeholders.
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