Accounting, Auditing, and Assurance Services

The purpose of this article is to provide definitions of accounting, auditing, and assurance services. In addition, the relationship between accounting, auditing, and assurance services will be explained and examples will be provided.

Definitions

Accounting services can be defined as the preparation and analysis of financial information which is reported to internal and external users via financial statements. Auditing services involve evaluating the reliability and credibility of financial information, as well as "the systems and processes responsible for recording and summarizing that information" (Messier, Jr., Glover, & Prawitt, 2006, p. 5-6). Assurance services can be defined as independent professional services that evaluate the reliability, credibility, relevance, and timeliness of information in order to improve the quality of information for decision makers (Messier, Jr. et al., 2006, p. 15). Assurance services may or may not be associated with financial information.

Relationship

The relationship between accounting and auditing can be compared to the relationship between an author and editor. Like the author, the accountant creates the material, in this case financial statements and reports. Like the editor, the auditor examines the material and suggests changes and corrections that must be made in order to meet the reliability and credibility requirements specified by the company and outside agencies, such as the Financial Accounting Standards Board (FASB). Assurance services take things one step further by examining the material to insure it meets relevance and timeliness requirements.

Examples

Examples of accounting services include services provided by accounts payable employees, accounts receivable employees, staff accountants, and the accounting manager or controller. Some specific services performed by these individuals include keying invoice information into an accounting program, processing timely payment of invoices, recording receipt of payment for products sold, reconciling inventory usage and receipts, and creating financial statements. Examples of auditing services include services performed by the internal audit staff and the external audit company, usually a CPA firm. Some specific services performed by these individuals include determining the reliability and credibility of accounting reports and financial statements, and assessing risk control in various areas.

Examples of assurance services include services performed by the external audit company. Some specific services performed by these individuals include determining the relevance and timeliness of accounting reports and financial statements, and reviewing company internal controls to assess the effectiveness of those controls. As previously mentioned, assurance services may or may not be associated with financial information. Assurance services that are associated with financial information include auditing internal controls or reviewing historical financial statements. Assurance services that are not associated with financial information include Nielsen television ratings and information about businesses that is provided by the Better Business Bureau.

References Messier, Jr., W. F., Glover, S. M., & Prawitt, D. F. (2006). Auditing & Assurance Services: A Systematic Approach. (4^th ed.). New York: McGraw-Hill Irwin.