Audit and Assurance:
We need assurance to,
- Increase confidence
- Reduce risk
It is very complicated topic to understand but you can understand it completely assurance and element of transaction through this example
For example if you want to purchase a house and you consult a person for this purchase. What are the elements that could be a part of this transaction?
1. User (i.e. you)
2. Subject Matter (in this case it is the House to purchase)
3. Practitioner ( the consultant with which you consult)
4. responsible party (the party through which you want to purchase house)
5. Criteria (the terms and conditions of buying)
In case of companies assurance, companies want assurance of their companies and they consult with practitioners i.e. Audit Firms. It increases the confidence of the companies and reduces the risk.
The following two types of assurance that auditors could give it to you
Types of Assurance
there are only two types of assurance which are reasonable assurance and limited assurance
Reasonable Assurance | Limited Assurance |
High Level | Moderate Level |
Positive Report | Negative Report |
Positive report:
Positive report doesn’t mean that practitioner is saying that every thing is absolutely correct but they broadly speaking say” it is repayable”
Negative Report:
Mean that Practitioners say “nothing has comes to our attention that causes us to believe that Financial statement are prepared in all material aspect in accordance with applicable reporting framework.
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