Understanding Student Assurance Services: A Comprehensive Guide

Assurance services are a cornerstone of the accounting profession, providing independent examinations of a company's processes and controls. These services are performed by qualified independent practitioners and play a vital role in reducing risk and fostering confidence in financial information. This article provides a comprehensive overview of assurance services, including their purpose, types, and the professionals involved.

What are Assurance Services?

In simple terms, assurance can be defined as helping clients make sure that their financial statements are accurate from start to finish by verifying records and accounting entries.

Assurance services involve an independent examination of a company’s processes and controls. Accounting professionals are qualified independent practitioners who can perform such services. Reducing risk allows intended users to refrain from making impaired decisions. Assurance focuses on analyzing the processes, controls, and operations of an organization. It looks to determine whether the business is operating with appropriate accuracy. Also, assurance services entail the testing of validity within past data of the business cycle.

Assurance or engagement services are composed of five elements:

Three-Party Relationship: Includes a practitioner, responsible party, and intended users. The practitioner is the qualified person(s) carrying out the assurance. The responsible party is the preparer of the information presented to the practitioner. The intended users rely on and make informed decisions in the outcome of the assurance. In the case of an internal audit, the responsible party may be lower management.
Subject Matter: The information or processes being examined.
Benchmark Criteria: The presence of appropriate measures to check the above subject matter against. This means that there must be some sort of agreed-upon framework in which data can be compared.
Evidence of Meeting the Criteria: The practitioner may refer to themselves as a skeptic. They look for evidence in the subject matter of being free of material misstatement. Audit evidence tends to be persuasive rather than conclusive.
The Assurance Report: A conclusion, written in a report form, that relates to the subject matter.

The Role of Assurance Professionals

Assurance professionals, often found in public accounting firms, play a critical role in ensuring the reliability of financial information. They work with clients to verify records and accounting entries, ensuring the accuracy of financial statements.

For instance, Laura McLaughlin (MAcc’18) accepted a job in assurance at KPMG in Denver shortly after her graduation from Vanderbilt. Now a Senior Associate, McLaughlin works with her team to perform testwork and update clients so that their financial statements can be relied upon as materially correct. Her job specifically focuses on risk assessment and planning processes of engagements in order to determine when and how the audit should be conducted.

Alexi Beavers (MAcc’17), who worked as an Audit Senior at Ernst & Young in New York City, says that no 2 days have been the same. Depending upon the factors above, she may meet with the client, work with the client’s internal audit team, or converse with Tax or Valuation Specialists in the United States, Europe, Asia, or other continents. She may physically find herself at her office, her client’s office or both on any given day.

Assurance vs. Consulting

It is interesting to note that on the opposite end of the spectrum is consulting. Consulting services create forward-looking information for an organization to better position itself. For example, implementing a 12-month rolling cash forecast to make long-term decisions.

Types of Assurance Services

Assurance services encompass a wide range of engagements, each designed to meet specific needs. Here are some common types:

Financial Statement Audits

Excluding specific exceptions, federal law requires employee benefit plans with 100 or more participants (ERISA defined) include audited financial statements with the Form 5500 filing. In the case of an audit, this would be a company's annual account. As a result, audits are a type of assurance service. However, auditors do not provide absolute assurance. The responsible party in the audit is the company's management.

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Let’s look at an assurance through the following example. is a public airline and offers passenger airline service. The company is being audited for Q1 2019. Mr. Hahn works for the public accounting firm performing the audit. He wants to verify the accuracy of the accrued liabilities by selecting a sample of 30 entries. The Assistant Controller of Amplified Inc, Miss Lock, assumes the responsibility of providing backup. Mr. Hahn verifies the completeness and validity of the information presented.

SOC Reports

Potential customers requiring a SOC report are becoming more common as internal control compliance issues are at risk when critical services are outsourced to a third party.

Government Auditing Standards ("Yellow Book")

Certain organizations that receive federal financial aid must submit reports and financial statements that have been audited by a CPA under the “Yellow Book” standards. The threshold for this varies depending on the grantor's requirements and/or the type of entity involved. Organizations receiving federal, state, or county funding are required to have compliance audits that are in accordance with generally accepted auditing standards - the standards for financial audits under Government Auditing Standards.

Single Audits

Single audits are specialized and tailored compliance audits for organizations that receive certain levels of federal and/or state grant awards.

Financial Statement Reviews

Financial statement reviews offer limited assurance to outside sources and third parties on the organization's financial statements and financial statement elements.

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Financial Statement Compilations and Preparation

Financial statement compilations and preparation engagements offer no assurance but provide management with a formal set of financial statements for the organization and are used when bookkeeping assistance is required.

Information Systems (IS) Audits

IS audits assess system input and output and processing controls. It also audits backup and recovery plans, system security, and computer facility reviews.

Administrative Internal Control Reviews

These reviews focus on departmental-level activities that are integral to the University's major business operations.

The Importance of Ethical Considerations

Members must follow the requirements of the AICPA's Professional Ethics Statements. Ethical vs. Information assurance services aim to reduce information risk by collecting gathered and professional opinions.

The Evolution of Assurance Services

Major accounting scandals, such as Enron, degraded confidence in the world of investing. Another earlier and critical step in improving assurance services goes back to 1993. The American Institute of CPAs (AICPA) held an Audit and Assurance Conference. A special committee on assurance services formed shortly afterward and issued a report. The organization has passed more disciplinary measures if there are issues in coordination with regulators.

Assurance in Practice: Examples and Insights

In assurance, professionals deal with the financial statement as a whole, while Valuation Associates are specialists that look at certain aspects of the statement. Since (my client) Coca-Cola is such a big company, professionals work to test that their revenue figures are accurate in a lot of different ways.

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