(a) The meaning of assurance
In an assurance engagement an assurance firm is engaged by one party to give an opinion on a piece of information which has been prepared by another party. The most common example of assurance is the statutory audit. Rather than the shareholders merely accepting the information provided by the financial statements as being sufficiently accurate and reliable, the statutory audit provide assurance as to the quality of that information. This makes the information provide reliable and therefore more useful to the user.
Because of the amount of work carried out, a statutory audit will provide a high level of assurance. The level of assurance given by other assurance engagements will depend on various factors.
Examples of ‘non-audit’ assurance engagements might include reports on such matters as:

• corporate social responsibility
• environmental policy
• employment policies
• non-financial performance indicators.

(b) The difference between an audit and a review
The objective of an audit (as a form of assurance engagement) is to enable the auditor to form an opinion on whether the financial statements of an entity comply in all material respects with an identified financial reporting framework, established by country-specific legislation, and accounting standards (for example, International Financial Reporting Standards).
The audit opinion typically makes reference to whether the financial statements give a ‘true and fair view’ or ‘present fairly’.
Audits are long-established formalised processes, tightly regulated by law and professional practice. Audits were developed because of the separation between ownership (by the shareholders) and stewardship (by the directors) in the corporate form of business organisation. In order to protect the shareholders, an audit is designed to provide a high level of assurance to the user of the financial statements.
Whereas an audit provides a high level of assurance, a review of historical financial statements provides a limited level of assurance that the information under review is free of material misstatement. The resultant opinion is usually expressed in the form of negative assurance i.e. ‘nothing has come to our attention to believe that the financial statements do not present fairly’.
The higher level of assurance provided by an audit will enhance the credibility provided by the assurance process, but is likely to be more time-consuming (and therefore more costly) than a review.