What’s the Difference Between Audit and Assurance Services?

Learn the difference between the often-confused concepts of audit and assurance services and discover their distinct purposes, methodologies, and business value. We’ll explore how these services complement each other and help organizations build robust security postures, with a focus on cybersecurity applications.

In brief:

• Audits and assurance services aren’t the same. An audit verifies accuracy and compliance. Assurance builds trust in how your systems perform and reduces risk.
• Assurance often includes an audit — but it goes further. It evaluates how effective your systems are, not only whether they meet minimum standards.
• You’ll probably need both. Audits meet regulatory demands. Assurance helps you win over investors, customers, and internal decision-makers.
• Cybersecurity is a growing driver. Assurance reports are especially useful in proving that your defenses go beyond compliance and actually protect your business.

The terms “audit” and “assurance” — like “privacy” and “security,” “agreement” and “contract,” or “authentication” and “authorization” — are often used interchangeably. But audit and assurance are two different concepts.

So, what are audit and assurance?

An audit verifies that your systems and records are accurate and compliant. Assurance services are different. Their purpose is to build confidence in the quality and accuracy of your systems.

This distinction sounds relatively simple. However, understanding the difference between audit and assurance services can help solve complex business problems, such as meeting compliance regulations and mitigating cyberthreats.

Let’s examine the differences between audit and assurance and consider how they can strengthen your business together.

What Is an Audit?

An audit is a systematic examination of systems, records or processes.

The audit’s primary objective is to verify records’ accuracy and ensure an organization complies with relevant regulations and accepted standards. In many cases, an audit verifies compliance with externally established standards. However, it can also be used to ensure an organization complies with its own internal governance requirements.

A prime use case for audits is verifying the integrity of financial records, whether for an external body, such as the Internal Revenue Service (IRS), or internal stakeholders, including your company’s chief financial officer or accounting department.

Audits tend to follow predefined frameworks, such as those outlined by ISACA, IIA, and AICPA  & CIMA, that have been designed to help organizations meet industry standards. Some of these include:

• Generally Accepted Accounting Principles (GAAP), which organizations use to guide financial audits
• International Organization for Standardization (ISO), which quality assurance teams use to verify a variety of performance standards, such as information security, food safety, and occupational safety
• National Institute of Standards and Technology (NIST), which organizations use to check and improve their cybersecurity systems. An NIST audit should be part of a comprehensive risk assessment that identifies vulnerabilities and provides security recommendations.

Because they’re based on these and similar standards, audits can go a long way toward reassuring internal stakeholders and compliance officials of your operations’ safety and quality. However, by engaging assurance services, you can earn confidence at an even deeper level.

What Is Assurance?

Assurance services are broader than audits because they encompass more than merely verifying accuracy or compliance. While auditing and assurance services often include auditing, assurance goes a step further.

When a company engages assurance services, the goal is to build confidence. In most cases, an assurance process is designed with a specific audience in mind and aims to give those stakeholders confidence in data’s integrity and systems’ or processes’ efficacy.

Investors, for instance, may require assurance reports to ensure that financial practices and operational systems justify a stock or share price. In some countries, regulatory bodies that enforce environmental, social, and governance (ESG) standards may specifically ask for an assurance report. For example, they may want to make sure that greenhouse gas emissions or hiring practices meet their standards, and an assurance report details the extent to which this is true.

One of the most common types of assurance reports are those that detail cyber defense mechanisms.

For example, suppose you’re in charge of cybersecurity for a software-as-a-service (SaaS) company that produces software for retailers. You may engage an assurance provider, who will then conduct a six-month SOC 2 attestation. But that attestation is only a single step in the assurance process.

The assurance provider would also evaluate the reliability of your cyber defenses, including checking the health and shelf life of physical equipment such as routers and firewalls. The provider would further verify that you have the most up-to-date cyber controls in place, not just those that satisfy SOC 2 requirements.

The assurance process may also review your internal governance protocols to ensure they promote transparency among the information technology (IT) team, managers, and the C-suite regarding how cyber incidents are monitored, mitigated, and reported.

Ultimately, your assurance provider generates a report. You can present this report to the rest of the cyber team, the IT team, the C-suite, and, especially, investors concerned about your digital defenses’ efficacy.

Which Industries or Companies Should Use Assurance Services Instead of Only Auditing?

Any organization that needs to demonstrate compliance and quality to specific groups of stakeholders should pursue assurance rather than just basic auditing.

This is particularly true of companies in highly regulated industries, including:

• Financial services organizations
• Healthcare organizations
• Companies that engage with external investors or have boards of directors that make important decisions
• Organizations that deal with customer data and need to demonstrate robust security to the public
• Any company subject to regulatory standards

Assurance plays an integral role in mitigating risk and demonstrating risk reduction to internal managers and insurance companies. By hiring assurance providers, you remove the guesswork for risk assessors by giving them concrete, quantifiable breakdowns of how you’re reducing risk exposure.

For example, when negotiating with an insurance company around the cost of a cybersecurity rider, you can use an assurance report to demonstrate why your premium should be lower than their normal rates. Perhaps you’ve gone beyond satisfying the SOC 2 attestation standards, and you feel this drastically reduces your risk of cyber incidents. An assurance report could use straightforward evidence to demonstrate why this is true.

Although audit and assurance services have distinct roles, they can be easily confused or conflated. Here’s a breakdown of what makes them different from each other.

The Main Difference Between Audit and Assurance Services

The main difference between audit and assurance services is that audits focus on accuracy and compliance, while assurance focuses on building confidence.

For example, a GAAP audit would verify that an accounting department is adhering to Generally Accepted Accounting Principles. But an assurance process would go a step further. It may demonstrate that applying GAAP standards has reduced the risk of overspending on overhead.

Assurance services may also show how the reliability of an organization’s accounting system has improved over time not just by using GAAP but also by implementing automatic reports around cash flow, inventory levels, and debt-to-income ratios.

Understanding the differences is one thing, but knowing which option to choose can bring its own challenges. Here are some guidelines that can make the choice more straightforward.

Do You Need a Formal Audit, an Assurance Engagement, or Both?

The answer is usually both.

Every organization that must meet compliance regulations will need at least one type of audit, and, in most cases, an assurance engagement will also bring value because it demonstrates the effectiveness of its systems.

Additionally, if a regulatory body requires an assurance report in addition to an audit, you must provide it as well.

In certain situations, an assurance engagement is sufficient. For example, a utility may need to generate an assurance report to present at a town meeting with members of the public. Or a healthcare company may need to produce an assurance report, such as a HIPAA risk assessment, to demonstrate to their board of directors that their system for protecting patient privacy has been, and will continue to be, effective.

You can use the decision matrix below to help you determine whether your organization needs an audit, assurance engagement, or both:

While each solution offers unique benefits, understanding how to use audits and assurance services together can help you develop a more comprehensive risk mitigation system.

How Audits and Assurance Services Work Together

An audit always provides some level of assurance simply because it demonstrates that an organization’s system checks the right boxes. If your company passes an International Financial Reporting Standards (IFRS) audit, for example, stakeholders can be assured that you have statements in place regarding cash flow, equity and income.

Audits and assurance services often work together because an assurance report frequently requires an audit. This means that an audit is, in many cases, the first step in providing assurance because it serves as a building block for an assurance program.

At the same time, it’s possible to get an assurance report without performing an audit. For instance, a financial services company can engage with assurance services to demonstrate how effective their collections processes are. This wouldn’t require an audit.

When used together, audits and assurance engagements support a general risk management program by providing a combination of data and analysis to certify your organization is using best practices. They also build trust with stakeholders because they show you’ve put systems in place to reduce risk.

Audits and assurance can be powerful tools when making strategic decisions. For example, an audit may reveal that an insurance company uses best practices when tracking accounts receivable, but an assurance report may show that collections processes aren’t effective. Using this information, the insurance company may invest in training employees around collections best practices or purchase software that comes with effective collections frameworks.

The Evolution of Audit and Assurance Services in Response to Cyberthreats

IT audit and assurance have had to adjust as cyberthreats have become a ubiquitous element of risk management. Audit and assurance services have grown to meet this challenge.

For instance, audit and assurance services now:

• Change constantly to accommodate the most recent threats on the landscape, such as artificial intelligence (AI)-powered phishing and botnet-driven distributed denial-of-service (DDoS) attacks.
• Use cyber intelligence from cyber defense researchers and specialists. This has resulted in cutting-edge technologies, such as endpoint detection and response (EDR) systems, being featured in audit requirements and their use being evaluated in assurance reports.
• Are customized according to different categories of threats. For instance, a CCPA audit would reassure an organization that it’s less susceptible to a data exfiltration attack, while an NIST cybersecurity audit would verify that tools are in place to defend against DDoS attacks.

The benefits aren’t merely theoretical. Many industry leaders recognize the benefits of using audit and assurance services. Let’s explore a real-world example next.

How One Company Benefited From Audit and Assurance Services

FreshBooks, a provider of cloud-based accounting software, benefited from audit and assurance services by conducting PCI DSS audits and engaging with credit card security assurance services.

FreshBooks uses PCI Security Standards Council (PCI SSC) to perform audits that demonstrate the company properly protects user payment information. Additionally, FreshBooks engages assurance services through third-party providers to ensure their systems adequately safeguard user data.

The combination of advanced auditing and assurance services has resulted in automated systems designed to prevent attackers from stealing sensitive information. For instance, FreshBooks has programmed in data validation systems that check the kind of data being inputted and, if it’s a credit card number, automatically redact all but the last four digits. In this way, FreshBooks reduces the risk of attackers intercepting sensitive information and either using it to steal money or selling it on the dark web.

Like FreshBooks, your organization can yield the fruit of risk-reducing audits and assurance services. The key is to be clear about your needs and goals.

Clarity Builds Confidence

When it comes to audits and assurance engagements, you must know what you’re asking for. An audit checks, and assurance assures. You can use both to enhance your operations, establish trust, and mitigate risk.

The future of risk mitigation will combine audit and assurance services and include:

• Continuous auditing using automated and AI-powered solutions
• Real-time assurance dashboards that generate reports designed to build stakeholder trust
• A transition away from box-checking to system-building using the data and observations of audits and assurance engagements

At Centric Consulting, our audit and assurance services take it a step further: We use audit data to guide you through the process of improving your systems. To achieve this, we identify gaps and inefficiencies, then help you address them by implementing internal controls. We also bring in regulatory experts to help you navigate standards like HIPAA, SOX, and FFIEC.

Our experts identify the most effective solution using a vendor-neutral approach. We provide unbiased recommendations built around what will help your organization meet its goals.

Our cybersecurity audit and assurance experts provide you with whatever you need to meet compliance requirements and build trust with a range of stakeholders. Learn more by connecting with Centric today. Let’s Talk