Negative Assurance

Negative assurance is a representation by an auditor that particular facts are believed to be accurate since no contrary evidence has been found. Negative assurance is normally used by auditors in situations where it may not be possible to positively confirm the accuracy of financial reports.

A positive assurance of accuracy is considered stronger, and means that the auditor has done sufficient work to state that a company's financial statements provide an accurate picture of its true financial condition. Positive assurance is required for certain audited financial reports released by public companies. Since fully auditing a public company in accordance with generally accepted accounting principles is a large undertaking, a positive assurance is normally issued only when legally required.

Negative assurance is most often issued when an accountant is asked to review certified financial statements prepared by another accountant. In this case, since another accountant has already certified the accuracy of the statements, a negative assurance is often seen as sufficient to confirm that the statements are free of material misstatements. Negative assurance opinions are also issued when an accountant is asked to review statements associated with the issuance of securities.

To issue a negative assurance opinion, the accountant must gather audit evidence directly and may not rely on indirect evidence, that is, evidence provided by a third party. Procedures used in preparation of a negative assurance opinion are not as stringent as those required for a positive assurance opinion.