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Different Types of Audit Report

1. Un-qualified opinion [Clean Report]


An unqualified opinion should be expressed when auditor concludes that
financial statements give true & fair view in accordance with the financial reporting
framework used for presentation and preparation of the financial statements.
Unqualified opinion also indicates that
a) The financial statement have been prepared using
Generally accepted accounting principles
Which have been consistently applied
b) Financial statements comply with relevant statutory requirements
c) There are adequate disclosures of all material matters [AS]

Modified Audit Report

Matters that do not affect auditors Matters that do affect the


opinion auditors opinion
(Immaterial) (Material)
(Emphasis of matter-paragraph)

Qualified Audit Adverse Audit Disclaimer of


Report Report opinion
Matters that do not affect the auditors opinion [(Immaterial)
emphasis of matter]
1. Auditor report is modified adding an emphasis
of matter paragraph
2. The paragraph is given to highlight a matter
affecting financial statement which in opinion of an auditor needs more
extensive disclosures
3. The emphasis of matter paragraph does not
affect auditors opinion and it will specifically refer to this fact
4. Emphasis of matter paragraph is generally given
to highlight a material matter regarding going concern problem where going
concern question is not resolved.
5. This paragraph is given above opinion
paragraph

B. Matters that do affect the auditors


opinion [Material]
1. Qualified audit report
Qualified audit report should be
expressed when auditors concludes that an unqualified opinion cannot be
expressed
There is disagreement with
management BUT It is not so material and pervasive so that adverse
opinion is required
Or
There is limitation on scope of audit
BUT it is not so material or pervasive so that disclaimer of opinion is
required
The above stated situation leads to a qualified opinion.
Qualified opinion should be expressed
as being Subject to or except for
All qualification are given at one place
in auditor report and they should be above opinion paragraph
All qualification should be qualified
individually and their impact of P&L & B/S should be ascertained
In case qualification cannot be
qualified then this fact is to be disclosed by an auditor
The aggregate effect of all
qualification is also required to be computed and aggregate affect on P&L
& B/s needs to be disclosed.
In case the aggregate affect is so
material that it leads to distortion of view expressed in financial statement
then instead of qualified report, an auditor is required to uses adverse
opinion.
2. Adverse Audit Report
An adverse opinion is expressed when possible effect of a disagreement
with management about financial statement is so material and pervasive, that
auditor concludes that a qualification of report is not sufficient to disclose the
misleading or incomplete nature of financial statement
When impact of qualification lead to
change in view [For ex. Profit into loss or vice versa] than adverse opinion
should be given by an auditor.
3. Disclaimer of opinion
A disclaimer of opinion is expressed when possible effect of limitation on
scope of audit is so material and pervasive that auditor has not been able to obtain
sufficient and appropriate audit evidence.
ELEMENTS OF AUDIT REPORT [AAS-28]
A. Title
B. Addresses
C. Opening or introductory paragraph
D. Scope paragraph
E. Opinion paragraph
F. Date of report
G. Place of signature
H. Auditors signature
A. Title
The auditors report should have an appropriate little i.e. Auditors Report. It
should be distinguished from the reports of others eg. officers, Board of
Directors etc.
B. Addresses
Auditors report should be appropriately addresses
It should be addressed ACC to circumstances of engagement and
applicable laws and regulation
Auditors report is genially addressed to authority appointing the
auditor
C. Opening of Introductory Paragraph
1. Auditors report should identify the financial statement
relates to
Entity
Date & period covered in financial statement that have been audited
2. It should include a statement of responsibility
Responsibility

Management Auditor
Auditor report should state that The responsibility of the auditor is to
financial statements are responsibility express an opinion on the financial
of management statement based on audit

D Scope Paragraph
1. The report should described the scope of audit by stating the
audit was conducted in accordance with the auditing standards generally
accepted in India
2. The report should include a statement that audit provides a
reasonable basis for opinion
3. The audit report should describe. The audit done is on basis
of
a) Examining on a test basis
b) Evidence supporting amounts and disclosures in
financial statement obtained
c) Assessment of accounting principles used in
preparation of financial statement
d) Assessment of significant estimates made by
management
e) Evaluation of overall financial presentations
The basic objective of audit is audit provides only Reasonable
assurance and by stating this in scope paragraph the inherent limitations of
audit are also signified.
Statements of facts [Report on Principles assertions u/s 227 (3)] is
included in scope paragraph.
1. 227 3a- Whether auditor has obtained all
information and explanation which to best of his knowledge and belief were
necessary for purpose of audit.
2. 227 (3) (b)- Whether in his opinion proper
books of account have been kept by company so far as appears from his
examination
Whether proper returns of branches not visited by him have been received
3. 227 (3) bb-Whether the report on accounts of
any branch office audited u/s 228, by a person other than company auditor has
been forwarded to him
How he has debt with the same in preparing the auditor report.
4. 227 3 (c)-Whether the P&L A/c & B/s are in
agreement with the books of account and returns
227 (3) (d)- Whether in his opinion B/s & P&L comply with accounting standard
referred to in Sec 211 (3C)
5. 227 (3) (f)- Whether any director is disqualified
from being appointed as director U/s 2741 (g)
6. 227 (3) (e)- Auditor shall state his observations
or comments which have adverse effect on functioning of company

D. OPINION PARAGRAPH [227 (2)]


The opinion drawn by an auditor on basis of audit carried by him in
regard to True & Fair view of
a) P&L [for the year ending]
b) B/s [as at]
in conformity with generally accepted accounting principles is to be given

E. DATE OF AUDIT REPORT


1. The date on which audit is completed should be
the date of audit report
2. This date should not be earlier then the date on
which financial statement are signed or approved by the management

F. PLACE OF SIGNATURE
The report should name the specific location which is generally the city where
audit report is signed

G. AUDITOR SIGNATURE
1. Only a person appointed as auditor should sign
in case of proprietor firm
2. In case firm is appointed then a partner
practicing in India should sign.
Membership no to be mentioned below Name & Signature
SPECIAL AUDIT SEC 233 (A)

1. Special audit is ordered by central government if it feels.


a) Affairs of business are not managed in accordance with sound
business principles or prudent commercial practices
b) Company is managed in manner which is likely to cause damage to
the interest of trade, industry
c) The financial position is such as to endanger its solvency
2. Shareholders can complain to the central government about affairs of
company. If central government is satisfied it can order special however central
government is not bound by such complaint even if the complaint is by all
shareholders.
3. Special audit can be ordered by central government even without giving
company an opportunity of being heard
4. Period of special audit will be mentioned in the order
5. Special auditor can be same person as appointed by company as company
auditor or another person, as per desire of central government
6. Powers & duties of special auditor will be same as that of company auditor as
per Sec 227
7 Special auditor to submit his report to central government
8 Remuneration is decided by central government paid by
company. It company does not pay it is recovered as land
revenue.

It may take action as it In case central


consider necessary government does not
take any action for 4
months. It can direct
company to circulator
read the special audit
General report to shareholders

Scope

Specific as per directions of central government