Negative assurance
Encyclopedia
Negative assurance is a method used by the Certified Public Accountant
to assure various parties, such as bankers and stockbrokers, that financial data under review by them is correct. Negative assurance tells the data user that nothing has come to the CPA's attention of an adverse nature or character regarding the financial data reviewed. This type of assurance is normally given to investment bankers and the SEC when the financial data are being used for stock and bond issuance. In addition, this assurance is given whenever a CPA is asked to comment on financial statements upon which a previous Audit Opinion has been rendered. (This type of assurance is unacceptable for the basic financial statements on which a certifying audit has been performed.)
Negative assurance comments are made on unaudited financial statements and subsequent changes, indicating that nothing came to the auditor's attention that suggests the statements do not comply with applicable accounting requirements; are not fairly presented in conformity with GAAP
applied on a consistent basis; or do not fairly present information shown therein. Negative assurance is given because the auditor has not made an examination in conformity with Generally Accepted Auditing Standards (GAAS). Negative assurance is not appropriate unless the CPA has made an examination in accordance with GAAS for the accounting period before the current one. This is because the auditor needs evidence that can be related to comfort letter
procedures. For negative assurance to be permissible, the evidence must have been gathered directly by the CPA giving the assurance, and not by another CPA.
Certified Public Accountant
Certified Public Accountant is the statutory title of qualified accountants in the United States who have passed the Uniform Certified Public Accountant Examination and have met additional state education and experience requirements for certification as a CPA...
to assure various parties, such as bankers and stockbrokers, that financial data under review by them is correct. Negative assurance tells the data user that nothing has come to the CPA's attention of an adverse nature or character regarding the financial data reviewed. This type of assurance is normally given to investment bankers and the SEC when the financial data are being used for stock and bond issuance. In addition, this assurance is given whenever a CPA is asked to comment on financial statements upon which a previous Audit Opinion has been rendered. (This type of assurance is unacceptable for the basic financial statements on which a certifying audit has been performed.)
Negative assurance comments are made on unaudited financial statements and subsequent changes, indicating that nothing came to the auditor's attention that suggests the statements do not comply with applicable accounting requirements; are not fairly presented in conformity with GAAP
Gaap
In demonology, Gaap is a mighty Prince and Great President of Hell, commanding sixty-six legions of demons. He is, according to The Lesser Key of Solomon, the king and prince of the southern region of Hell and Earth, and according to the Pseudomonarchia Daemonum the king of the western region and...
applied on a consistent basis; or do not fairly present information shown therein. Negative assurance is given because the auditor has not made an examination in conformity with Generally Accepted Auditing Standards (GAAS). Negative assurance is not appropriate unless the CPA has made an examination in accordance with GAAS for the accounting period before the current one. This is because the auditor needs evidence that can be related to comfort letter
Comfort Letter
A comfort letter is a document prepared by an accounting firm assuring the financial soundness or backing of a company. The comfort letter can be issued by a CPA declaring no indication of false or misleading information in the financial statements and that the company's prospectus follows GAAP....
procedures. For negative assurance to be permissible, the evidence must have been gathered directly by the CPA giving the assurance, and not by another CPA.