Determine the levels of assurance that can be provided on audit reports. Explain how the internal controls of a company can impact the overall business.

In order of increasing level of rigor, certified public accountants provide three types of financial reporting assurance services - compilations, reviews and audits. A compilation consists of constructing a firm's financial statements using data provided by management. It reflects no level of assurance regarding the accuracy and quality of the data. A review provides limited assurance regarding the accuracy and quality of the statements in question. Finally, an audit provides an avenue for the CPA to provide a reasonable level of assurance that a firm's financial statements are free from material misstatement and in conformance with generally accepted accounting principles (GAAP).

In an audit, there are four different types of opinions, each of which is represented via a letter attached to the financial statements in question. The four types of auditor opinions are listed below (in order of confidence that a firm's financial statements are free from material misstatement and in conformance with GAAP.

- Unqualified opinion-clean report

- Qualified opinion-qualified report

- Disclaimer of opinion-disclaimer report

- Adverse opinion-adverse audit report

In many cases, the internal controls of a company can lend credence to the validity of the audit process. Sound internal controls not only ensure the integrity of accounting information, but they promote accountability and efficiency and mitigate the likelihood and severity of fraud.