What is Negative Assurance?

Negative assurance is a comment made by an auditor to indicate that during an audit of financial accounts, nothing was uncovered to suggest that there might be a problem. This does not necessarily mean that there is no problem with the accounts, only that no issues were discovered. A negative assurance will be given in connection with a full audit opinion that discusses the findings.

In the process of an audit, the auditor pores over financial records to determine whether they are accurate and complete. Part of the work involves determining if the accounts were kept in accordance with the standards and practices of the industry. It also involves looking for signs of falsifications, omissions, and other behavior that might be indicative of fraud. Auditors take note of anything that appears unusual and investigate it as fully as possible. Once the examination is complete, a report can be developed with a final opinion.

The negative assurance means that the auditor personally reviewed the information and did not find anything that would raise a red flag. No evidence of fraud or accounting mistakes was uncovered and the material presented appears to be accurate and complete. Conversely, in a positive assurance, the auditor would point to specific evidence uncovered to show that there is a problem with the accounts being audited.

People interested in the outcome of an audit include the people responsible for the records along with investors, regulators, and members of the general public who are curious about the financial health of a company. A negative assurance shows that the accounts appear to be in order. This may be because they actually are in order and have been properly maintained, or because fraud is occurring but it has been so effectively covered up that the auditor cannot identify it or find evidence that could lead to finding the fraud.

Auditors are very careful about the framing of their final opinions because they are liable for mistakes made during an audit. They choose the terms they use with caution and are meticulous about documenting their findings and explaining how they arrived at a given conclusion. For a negative assurance, the auditor provides proof that there is a lack of suggestive evidence, and may offer other opinions and thoughts as well in the completed audit. This information is kept on file and if the audit was incorrect, the auditor may be investigated to determine if a mistake was made or if the auditor was complicit in attempting to conceal fraud.