Difference Between Positive and Negative Assurance
Audit is a process through which independent auditors assess the financials of a company and provide an independent opinion. It increases the reliability of the company’s financial statements to the relevant users. It allows for unbiased feedback on the reporting that can be used by businesses or organizations.
It is important for businesses to have regular audits because it helps them stay accountable and prevents any fraud from happening.
The financial statements are evaluated for completeness, accuracy, and compliance with the governing criteria. Audit evidence is collected during this process to support any findings of the audit process.
The purpose of an audit is to provide an objective and independent assessment of an organization’s financial statements. The auditor’s opinion provides assurance that the financial statements are free from material misstatement and give a true and fair view of company performance.
However, making a conclusion over the audit opinion is not always straightforward. The auditor must obtain sufficient evidence to support their conclusion, which can require significant time and effort. In some cases, the auditor may need to examine the underlying transactions and records.
Assurance engagements are a type of audit service that provide an independent assessment of an organization’s financial statements. These engagements are performed by certified public accountants (CPAs) who have the required skills and knowledge to provide an objective opinion on the fairness of the financial statements.
There are many types of assurance engagements, but we will discuss two main types which the positive and negative assurance engagement.
Positive assurance is the type of assurance engagement that auditors have done sufficient work to collect the audit evidence to support that company financial statements are free from material misstatements. The financial statements are presented with the true and fair view with reasonableness accuracy.
Auditors are in charge of gathering audit evidence to ensure that the subject matter meets suitable criteria. The auditors ensure that financial statements are present with the financial assertions.
It is the type of assurance that we can see in the audit service. The auditor reviews the company’s financial statements and issues an opinion on the report. They issue opinions if the reports are free from material misstatement and presented with true and fair. It is not the absolute opinion but it is the highest level of assurance that auditors can provide.
Negative Assurance is the type of limited assurance that auditors can provide over the company report.
Instead of providing an audit opinion over the company’s financial statement, the auditor only states that nothing has come to their attention which leads to the indication of material misstatement on the financial statement.
It is considered a lower level of assurance if compare to the positive assurance service. The auditors are not required to obtain sufficient audit evidence and provide an audit opinion on the report. They are only required to perform the review if any issues appear and impact the financial report.