Tutorial 3

Chapter Three:
Audit Reports
 Tutorial’s Outline:
1. What are the conditions
required to issue standard
unqualified audit report?

2. What are the parts of the

standard unqualified audit
report?
Introduction
The audit report is the final
step in the entire audit process.
Audit reports are essential
because they are used to
communicate the auditor’s
findings to the users of such
reports.
Types of Audit Reports
1- Unqualified Audit Report:
A- Standard unqualified audit report.
B- Unqualified audit report with explanatory
paragraph or with modified wording.
2- Qualified Audit report.
3- Adverse Audit report.
4- Disclaimer Audit report.
 Remember

What are the Conditions for issuing a

Standard Unqualified Report?
1)A complete set of the financial statements should
be presented by the Co. management for audit.
2)The three general standards of the GAAS should
be followed.
3)Sufficient appropriate evidence should be
accumulated by the auditor.
4)The financial statements should be presented in
accordance to GAAP.
5)There are no other circumstances that require
adding an explanatory paragraph or modifying the
Parts of Standard Unqualified
Audit Report
The Standard Unqualified Report includes
seven parts:
1) Report Title.
 An Audit Report should be titled and that
title should include the word
“Independent.”
2) Audit Report Address.
 The Audit report is directed and addressed
mainly to the stockholders, members of
BOD or both.
 Parts of Standard Unqualified Audit
Report- Cont’d
3) Introductory Paragraph (first paragraph) It
should:
i. State that the auditor has done an audit.
ii. Include the name of the company being audited
(Auditee).
ii. List the financial statements that were audited
(named as used by the company) along with the
correct date.
iii. State that the financial statements are the
responsibility of the company’s management and the
auditor’s responsibility is to only to provide an
opinion on such financial statements.
 Parts of Standard Unqualified Audit Report
4) Scope Paragraph
It is mainly concerned about what the auditor did
during the audit.
i. It should be stated that the auditor had followed
the GAAS during the audit of the financial
statements.
ii. It should be stated that the audit was done to
obtain reasonable assurance about whether the
financial statements are free of material
misstatements.
iii. The word “on test basis” should be stated to
reveal that the audit was based on a sample rather
than testing each and every transaction.
iv. It should be stated that the auditor has evaluated
the appropriateness of the accounting principles,
estimates and financial statements disclosures
Parts of Standard Unqualified Audit
Report
5) Opinion Paragraph
i. It should start by the phrase “In our
opinion” to show that this is the auditor’s
own opinion which is based on a
professional judgment not on an absolute
fact.
ii. The auditor should state whether the
financial statements are presented
fairly in accordance to GAAP.
Parts of Standard Unqualified Audit
Report
6) Name of CPA Firm
 The name of the CPA firm should be
stated along with the auditor’s name
since it has the legal and the professional
responsibility.
7) Audit Report Date
 The audit report should be dated as of the
last day the of fieldwork.