Audit and assurance play important role, so that the capital market and the economy of the company work effectively. It provides confidence to the present stock holders of the company in its future. The further investment by the stock holders depends on this report. Hence it can rightly be said that the company success depends on the report of audit and assurance. The report is formed by the auditor.
Purpose of audit and assurance
The message from the auditor of the company is given in plain words to the stock holders in audit and assurance report. The report represents the financial status of the company. This helps them in making decision regard their share in the company. This procedure needs to be updated from time to time.
Who needs the access to the financial information?
The stock holders of the company are different from the management, owners and administration of the company. Hence they need an independent source to know about the financial status of the company so that they can assess the performance of the management. Besides share holder the lenders, staff, market analysts, creditors, government, perspective stock holder and the public also need asses to the financial information of the company.
Why is it required?
Audit and assurance increased the credibility of the information in the final financial statement. Thereby it increases the confidence about the company among the people. There are many level of assurance that the practitioners perform. They lead to different level of
Absolute assurance: it consist of guarantee.
Reasonable assurance: this is the audit of the financial statements where details of the testing, evidences that are gathered and the required support are given in the conclusion. It represents the true and actual view of the financial condition of the company. The auditor provides it according to the accounting standard. This type of assurance is difficult to get as it is not practical for the auditor to investigation and audit every transaction. The report consists of opinion on the financial statement that mostly cannot be accurately determined by an individual and might be dependent on the future events.
Limited assurance: it is the review of the financial statements and consist primarily enquires and analysis. Less detail of the procedure is given. There are no evidences to believe that the conclusion is false, hence people can take it to true and rely on it.
No assurance: this report consist of financial statement.