Assurance service is an independent professional service, typically provided by a Certified Public Accountant or a Chartered Certified one.
The goal is improving information or the context of information so that decision makers can make more informed, and presumably better, decisions. Assurance services provide independent and professional opinions that reduce information risk.
The technical definition of assurance requires components set out in the International Framework for Assurance Engagements:
- A three-party relationship – the responsible party who prepares the information to be assured; the independent practitioner who assures the information; and the users who are expected to rely on the information. In the case of an audit, the responsible party is the management of the company, the practitioner is the audit firm and the users are primarily the shareholders.
- Agreed subject matter – in the case of an audit, this would be the annual accounts of a company. However it could be almost anything in practice – the systems operated by a state lottery, a company’s greenhouse gas emissions, controls over a supply chain etc.
Audits are therefore a type of assurance service. However, audits only test the validity of the assertions in financial statements, and are subject to regulation under International Standards on Auditing. Assurance engagements designed to test historical financial information are referred to as assurance reviews (these are regulated by International Standard on Review Engagements (ISRE 2400).