What Are Assurance Services?
Let me explain to you what assurance services are: they are a type of independent professional service typically provided by certified or chartered accountants, such as certified public accountants (CPAs). These services can involve reviewing any financial document or transaction, like a loan, contract, or financial website, and this review certifies the correctness and validity of whatever the CPA is examining.
Key Takeaways
You should know that assurance services are independent professional services usually handled by CPAs. They are defined as services that improve the quality or context of information for decision-makers. By reducing information risk, they allow for better decision-making. Businesses rely on them to boost the transparency, relevance, and value of information shared with the market and investors. These services can apply to risk assessments, business performance, information systems reliability, e-commerce, and healthcare performance.
Understanding Assurance Services
Assurance services focus on improving the quality of information for those making decisions. When I say providing independent assurance, I mean it brings comfort that the information you're basing decisions on is reliable, which reduces risks—specifically, information risk.
Providers of these services help clients manage the complexities, risks, and opportunities in their partner networks by proactively handling and monitoring risks from third-party relationships. Businesses use assurance services to enhance the transparency, relevance, and value of the information they disclose to the market and investors. Many discover that better sharing of business performance leads to sustainable growth and a competitive edge.
If you're a certified accountant looking to engage in assurance services, technical guidance is available in the International Standard on Assurance Engagements (ISAE) 3000 and The Assurance Sourcebook from the Institute of Chartered Accountants in England and Wales (ICAEW), which includes practical advice for firms selecting among different assurance services.
Over the past years, certain regulations have driven up demand for assurance services, such as the Sarbanes-Oxley Act of 2002, aimed at protecting investors from false financial information.
Types of Assurance Services
Assurance services come in various forms and are designed to give the firm hiring the CPA relevant information to simplify decision-making. For instance, a client might ask the CPA to thoroughly check all numbers and calculations on their mortgage website to confirm everything is accurate.
Risk Assessment
Entities face greater risks and more sudden changes in fortune than ever before. Managers and investors worry if entities have fully identified these risks and taken steps to mitigate them. This service ensures that an entity's business risk profile is comprehensive and checks if appropriate systems are in place to manage those risks effectively.
Business Performance Measurement
Investors and managers need more than just financial statements; they require a balanced scorecard. This service evaluates if an entity's performance measurement system includes relevant and reliable measures to assess how well goals and objectives are met or how performance stacks up against competitors.
Information Systems Reliability
Managers and employees depend on good information more than ever, increasingly demanding it online and in real-time. The emphasis should be on systems that are reliable by design, not on fixing data afterward. This service assesses whether an entity's internal information systems—both financial and non-financial—provide reliable information for operating and financial decisions.
Electronic Commerce
The growth of electronic commerce has been slowed by a lack of confidence in the systems. This service evaluates if the systems and tools used in e-commerce ensure appropriate data integrity, security, privacy, and reliability.
Healthcare Performance Measurement
In the $1 trillion healthcare industry, motivations have shifted dramatically in recent years. The old fee-for-service system rewarded delivering the most services, while the new managed care system rewards delivering the fewest. As a result, healthcare recipients and their employers are more concerned about the quality and availability of services. This service provides assurance on the effectiveness of healthcare services from HMOs, hospitals, doctors, and other providers.
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