Accounting Theory

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Introduction
1. Definition
According to Robert K. Elliot, 1997, assurance is a positive declaration that produces quality information which enhances the degree of confidence for all intended users as well as improves the quality of decision that being made. It is also part of corporate governance which provide reliable and accurate information to the stakeholders such as investors, employees, government, voluntary sector and market regulators, regarding the efficiency and effectiveness of organization’s policies, strategies and operations and compliance with the statutory obligations will be provided by the management. Due to the risk of uncertainties in the environments, stakeholders demand more from financial information to non-financial information. Not only the numerical information tell the conditions of an organization to the stakeholders, but transactions, changes in information technology, markets and risks and changes in laws and regulations are crucial to them as well. ICAEW defined external assurance as the provision of an independent opinion by an expert (chartered accountants) on information prepared by one party for the benefit of another parties. By providing assurance on non-financial information reporting is also known as external assurance reports. Basically there is no requirement or significant demand by public or association on this external assurance. Therefore, auditors are only required to meet their responsibilities in checking the consistency and reliability of information in the reports to enhance corporate governance. In future, if there are major errors from external assurance reports which affect the perceptions of investor, this would lead to an increase in demand for external assurance and indirectly will cause strictly rules or framework to be implemented on this practices. If stakeholders were lose confidence in the quality of information, the use and value of external assurance reports might change according to that. Other than external assurance, internal assurance also can provide support necessary or step for the efficiency of the internal control and prevent or reduce several of risks that might occur in an organization. If an organization has a team of internal auditors to look over its practices, management or activities in the firm, this will indirectly support corporate governance and public accountability process. With doing so, an organization not only able to deliver their financial information to the stakeholders but as well as expose the condition or improvement of the firm which is consist of non-financial information to them. Internal auditors are also able to assist external auditors by providing them relevant and reliable information non-financial information reporting such as opportunities for pragmatic efficiency and effectiveness improvement in internal control and risk analysis. These lead those decision-makers to identify risks in business. Whereas, audit committees are responsible to evaluate and review the quality of audit reports conducted by the external and internal auditors. Establishment of audit committees is important in provides assurance which is relevant and reliable to the accounting and reporting practices of the organization. The requirements to be audit committee member are stated in Listing Requirements of Bursa Malaysia Securities Berhad to ensure they act independently without conflict of interest with that particular of organization. Therefore, audit committees help to improve reliability and relevance of the non-financial information reporting as well as financial information reporting. They have unlimited access to all information if they have any doubt on the reporting to investigate any activities. Reliability and relevance are two of the four keys of qualitative financial reporting information. The other being understandability and comparability. It is important to define the meaning of reliability and relevance to ensure accuracy of...
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