AICPA and the Institute of Internal Auditors (IIA) have positioned the auditing professions to become “assurance professions”

The American Institute of Certified Public Accountants (AICPA) and the IIA have positioned the auditing professions to become “assurance professions”.

What is the difference between auditing services, assurance services, and attestation services?

Attestation services involve providing written conclusions that attest to the reliability of written information used by third parties. Assurance services are often performed by independent professional services with the intention of improving the quality of information for decision makers. Both assurance services and attestation services are two of a much broader range of auditing activities. Auditing is a systematic process that uses logical, structured, and organized procedures to objectively obtain and evaluate evidence that regards assertions made by management about economic actions and events to ascertain the accuracy of the assertions and established criteria, which is then communicated to interested users.

What are some economic issues that can drive an increased demand for assurance services?

The result achieved from attestation is a written conclusion about whether or not a company’s written assertions are reliable. The results achieved from assurance services is to provide better information for decision makers. The objective of attestation is reliable information, the objective of assurance is better decision making.

What is an example of an assurance engagement and an attestation engagement other than the audit of financial statements?

The economic issues that drive the increased demand for assurance services include many traditional demands that first helped the auditing profession to immerge; i.e. growth in all sectors, the will for prosperity, corporate mergers, and business moving from the private sector to the public sector. Perhaps the most current economic issues that lead the demand for assurance services are policies that corporations must follow. An example that comes to mind is the recent policies put in to place for lending institutions.

What's the difference between the two?

An assurance engagement would be a CPA paid by the preparer or user, while an attestation engagement would be a CPA paid for by the preparer.

What are some of the major factors over the past 30 years that have led to increased auditing standards such as the Sarbanes-Oxley Act of 2002?

The collapse of corporate giants such as WorldCom and Enron due to fraudulent accounting practices, are two of the largest eye-opening events over the past 30 years which has led to increased auditing standards such as the Sarbanes-Oxley Act of 2002. These publically traded companies, along with several others including Waste Management, Tyco International, and Adelphia, experienced dramatic declines in their stock value when the word got out that their accounting practices were not in accordance with generally accepted accounting principles (GAAP). The collapse of each of these corporations and their subsidiaries left thousands of stakeholders in a dire predicament. From shareholders who witnessed their stock value fall lower than the value of the paper their shares were printed on, to employees who were left without a job, benefits, retirement funding, etc., the public outcry for more regulation forced lawmakers to tighten accounting practices across the board.

In addition to setting new standards for how all publically traded companies report earnings, SOX contains 11 sections that range from guidelines for corporate board member’s responsibilities to the judicial punishment associated with scandalous reporting. SOX had helped to restore public confidence in investing in publically traded companies prior to the recent banking and credit market failures, but as we all know, public confidence in the NYSE at the moment is grim at best.