Glossary term
Assurance
Subject: Governance, Internal Control and Audit
Also known as: Independent Assurance
Assurance is an independent, evidence-based opinion that gives stakeholders confidence that something, such as financial statements, a control, a process or a report, is reliable and working as claimed.
Explanation
Management says things are fine; assurance is someone else checking. It is provided by external auditors, internal audit, risk and compliance functions and specialist reviewers, and its weight depends on how independent the provider is and how much work is done. Reasonable assurance, the usual level for a financial audit, is high but not absolute. Limited assurance, as in many sustainability reviews, rests on fewer procedures and is worded as nothing having come to the reviewer's attention. Assurance differs from advice, where the adviser helps design solutions. Boards seek combined assurance to see where the lines of defence overlap or leave gaps. The output is usually a report with an opinion or rating. Lenders and shareholders who cannot inspect the books themselves use the report to decide whether to trust the numbers.
Example
A university publishes a carbon emissions figure in its annual report. Funders want to know it is reliable, so the university hires an independent firm to examine the data collection and calculations. The firm issues a limited assurance report saying it found nothing to suggest the figure was materially misstated.
Not to be confused with
- Audit
- An audit is one way of giving assurance. Assurance also covers reviews and other attestations, and is broader than audit.