Negative Assurance
What Is Negative Assurance?
Negative assurance is a determination by an auditor that a specific set of realities is accepted to be accurate since no opposite evidence has been found to dispute them. Negative assurance is regularly utilized by auditors in circumstances where it is beyond the realm of possibilities to confirm the precision of financial reports positively. The goal of negative assurance is to confirm that no evidence of fraud has been found or that any legal accounting rehearses were found to be abused.
Figuring out Negative Assurance
Negative assurance typically emerges without any positive assurance. A positive assurance of precision is thought of as more grounded and means that the auditor has accomplished adequate work to state that a company's financial statements give an accurate image of its true financial condition in view of proofs.
Positive assurance is required for certain audited financial reports delivered by public companies. Since completely auditing a public company as per generally accepted accounting principles (GAAP) is a large endeavor, a positive assurance is ordinarily issued just when legally required.
Negative assurance is most frequently issued when an accountant is approached to survey certified financial statements prepared by another accountant. In this case, since one more accountant has proactively certified the exactness of the statements, a negative assurance is frequently viewed as adequate to confirm that the statements are free of material misstatements. Negative assurance sentiments are likewise issued when an accountant is requested to survey statements associated with the issuance from securities.
To issue a negative assurance assessment, the accountant must gather audit evidence straightforwardly and may not depend on indirect evidence, that is to say, evidence given by an outsider. The procedures utilized in the readiness of a negative assurance assessment are not quite so severe as those required for a positive assurance assessment.
It is important to note that negative assurance isn't expressing that any illegal activity didn't happen, it is expressing that the auditor couldn't track down any occasions of illegal activity.
Illustration of Negative Assurance
Company ABC employs an auditing firm to go over its financials from the fiscal year 2019. The auditor assigned to the case investigates all the accounting records, which incorporate general ledgers, diaries, and other different financial archives. The auditor doesn't check each specific entry yet does a go over of the entirety of the important data. The auditor then, at that point, interviews employees and management on specific subjects. After this survey, the auditor tracks down no examples of fraud or any accounting infringement. The auditor then, at that point, issues a negative assurance that confirms no issues, errors, or misstatements were found.
Features
- Negative assurance is a confirmation from an auditor that certain realities are accurate in light of the fact that there is no evidence going against the norm.
- The purpose of negative assurance is to confirm that no fraud or infringement have been found.
- At the point when positive assurance (the proof of realities) isn't applicable, negative assurance is utilized.
- Negative assurance isn't expressing that any illegal activity didn't happen, it is expressing that the auditor couldn't track down any occasions of illegal activity.
