how assurance works
one of the best examples of assurance is whole life insurance as opposed to term life insurance in the u k life assurance is another name for life insurance the adverse event that both whole life and term life insurance deal with is the death of the person the policy covers since the death of the covered person is certain a life assurance policy whole life insurance results in payment to the beneficiary when the policyholder dies a term life insurance policy however covers a fixed period such as 10 20 or 30 years from the policy s purchase date if the policyholder dies during that time the beneficiary receives money but if the policyholder dies after the term no benefit is received the assurance policy covers an event that will happen no matter what while the insurance policy covers a covered incident that might occur the policyholder might die within the next 30 years types of assuranceassurance can also refer to professional services provided by accountants lawyers and other professionals these professionals assure the integrity and usability of documents and information produced by businesses and other organizations assurance in this context helps companies and other institutions manage risk and evaluate potential pitfalls audits are one example of assurance provided by such firms for businesses to assure that information provided to shareholders is accurate and impartial assurance services are a type of independent professional service usually provided by certified or chartered accountants such as certified public accountants cpas assurance services can include a review of any financial document or transaction such as a loan contract or financial website this review certifies the correctness and validity of the item being reviewed by the cpa example of assuranceas an example of assurance services say investors of a publicly traded company grow suspicious that the company is recognizing revenue too early early realization of revenue might lead to positive financial results in upcoming quarters but it can also lead to worse results in the future under pressure from shareholders company management agrees to hire an assurance firm to review its accounting procedures and systems to provide a report to shareholders the summary will assure shareholders and investors that the company s financial statements are accurate and revenue recognition policies are in line with generally accepted accounting principles gaap the assurance firm reviews the financial statements interviews accounting department personnel and speaks with customers and clients the assurance firm makes sure that the company in question has followed gaap and assures stakeholders that the company s results are sound assurance vs negative assuranceassurance refers to the high degree of certainty that something is accurate complete and usable professionals affirm these positive assurances after careful review of the documents and information subject to the audit or review negative assurance refers to the level of certainty that something is accurate because no proof to the contrary is present in other words since there is no proof that the information is inaccurate or that deceptive practices e g fraud occurred it is presumed to be accurate negative assurance does not mean that there is no wrongdoing in the company or organization it only means that nothing suspecting or proving wrongdoing was found negative assurance usually follows assurance of the same set of facts and is done to ensure that the first review was appropriate and without falsifications or gross errors therefore the amount of scrutiny is not as intense as the first review because the negative assurance auditor purposefully looks for misstatements violations and deception assurance faqsassurance has dual meanings in business it refers to the coverage that pays a benefit for a covered event that will eventually happen assurance also refers to the assurance given by auditing professionals regarding the validity and accuracy of reviewed documents and information these auditors exercise great care to make these positive assurances whole life insurance is perhaps one of the best understood examples of assurance as long as the policy remains in force this type of insurance guarantees to pay a death benefit at the death of the insured despite how long that event takes to occur assurance in auditing refers to the opinions issued by a professional regarding the accuracy and completeness of what s analyzed for example an accountant assuring that financial statements are accurate and valid asserts that they have reviewed the documents using acceptable accounting standards and principles life insurance and life assurance are often used interchangeably and sometimes refer to the same type of contract however life insurance is coverage that pays a benefit for the death of the insured if the death occurs during the limited contractual term assurance or life assurance is coverage that pays a benefit upon the death of the insured despite how long it takes for that death to occur an assurance company could be a life insurance assurance company providing benefits upon the certain death of the insured but commonly refers to an accounting or auditing firm providing assurance services to businesses and organizations these services include complete and intense reviews of documents transactions or information the purpose of these reviews is to confirm and assure the accuracy of what was reviewed the bottom lineassurance is coverage that pays a benefit upon the eventual occurrence of a certain event it also refers to a service rendered by a professional to confirm the validity and accuracy of reviewed documents and information assurances in auditing can help companies address risks and potential problems affecting the accuracy of their reporting on the contrary negative assurance is a less intense review that also provides a form of assurance negative assurance asserts that what was reviewed is accurate because nothing contradicting this claim exists 