Assurance, Attestation & Auditing

Assurance, Attestation & Auditing

1. Assurance → Improves quality of information.
2. Attestation → Auditor confirms another party’s assertion.
3. Auditing → Evidence-based check of financial info & management’s claims.

The reasons people demand auditing and assurance services (exam-ready points):

1. Credibility of information

   • Users (shareholders, banks, investors, government) want to rely on financial statements. Audit gives independent assurance that the numbers are not materially misstated.

2. Resolution of conflict of interest (agency problem)

   • Management prepares the accounts, but owners and other outsiders depend on those accounts. An independent auditor helps ensure management is not hiding losses or manipulating performance.

3. Improved confidence for decision making

   • Lenders, investors, suppliers, etc. are more confident to give loans, invest, or trade with the company when the statements are audited.

4. Compliance / requirement

   • Many laws, regulations, stock exchanges, and lenders require audited financial statements, so companies need audits to meet these obligations.