Audit and assurance Essay Example | Topics and Well Written Essays - 1500 words

Audit and assurance - Essay Example Linked in to this is the growing belief that many firms of auditors are unable to make objective judgments because they are either too close to the clients that they are auditing or they get close to them during recurring audits of the same clients. This is the main area where an auditor’s independence is brought under question. The basic idea of audit is to bring in an independent assessor of the financial statements; the assessor i.e. the auditor should be honest while giving out his conclusion on the financial statements. The auditor issues a report explaining the audit process and gives his opinion as to the truth and fairness of the financial statements i.e. whether they are prepared in accordance with the relevant legal and accounting standards. There are many different types of assurance engagements: An auditor usually gives out two types of assurances, Reasonable or Limited Assurance. A reasonable assurance is of high level while a limited assurance is a moderate level assurance. When giving out a reasonable assurance, the auditor gives out a positive report (means the statement given out would be a positive one as opposed to a normative statement given out in limited assurance). Many companies get their financial statements audited by different audit firms, along with these external audits, companies also assign other assurance services to the existing auditor, this issue has caused a bit of concern over the recent years. The independence of the auditor is questioned when he takes up such assignments along with the external audit assignment. To avoid such situation, the auditor can perform certain strict procedures while performing the external audit along with other assurance services: The treasury selection committee in May 2009 published a report to address the issue of increasing investor’s confidence in a firm, in this report, the main aim of