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Audit Report

What is Audit Report?

• An audit report is an opinion on the financial statements of the


Company given by the Auditors after conducting the financial audit of
the company. The auditor’s report is the end product of each
audit. The Auditor’s report is published with the Annual report of the
Company.
Important Points/Purpose

• This is used by the investors to assess the financial performance of


the entity as on the basis of that only they will decide whether to
invest in that company or not.
• It is used by the Shareholders and the board of directors for assessing
the transparency of the financial statement and integrity of the
management.
Types of Audit Report

Types of Audit Report Opinion


Clean Report Unqualified Opinion
Qualified Report Qualified Opinion
Disclaimer Report Disclaimer Opinion
Adverse Audit Report Adverse Opinion
Clean Report/Unqualified
• Issued for any audit where the auditor is satisfied that the financial
statements present a true and fair view of the operations and
transactions in an organization
• An audit report with an Unmodified Opinion is also known as a
‘Unqualified Report’
Qualified Report

• A qualified audit opinion letter indicates that auditors found issues in


a company’s financial information.
• These issues prevent the auditors from issuing a clean opinion on the
company’s operations.
• The first qualification represents a single deviation from GAAP.
• Another qualification is limitation of scope.
A Basis FOR Qualified Opinion
• The notes to the financial statements do not disclose that one of the
company’s directors, Mr.X, controls ABC Limited, from which the
company purchased and services during year of xxx. Such disclosure is
required by standards.
• We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our qualified opinion.
Disclaimer Report

• In case the auditor fails to frame an opinion about the financial


statements of the company then he gives a disclaimer of opinion. The
reason for the disclaimer can be the lack of audit evidence or the
restriction by the client to examine all the records etc.
Example of a Draft Disclaimer of
Opinion
• We were engaged to audit the financial statements of ABC Private
Limited (“the entity”) which comprises the Balance Sheet as at March 31,
XXXX, the statement of Profit and Loss, (the statement of changes in
equity) and statement of Cash Flows for the year then ended, and notes
to the financial statements, including a summary of significant
accounting policies.
•  We do not express an opinion on the accompanying financial statements
of the entity. Because of the significance of the matters described in the
Basis for Disclaimer of Opinion section of our report, we have not been
able to obtain sufficient and appropriate audit evidence to provide a
basis for an audit opinion on these financial statements.
Adverse Audit Report

• This is the worst type is the adverse opinion that an auditor can give.
It reflect that the financial statements of an entity are materially
misstated, misrepresented and do not reflect its correct financial
performance.
Example

• In our opinion, because of the omission of the information in the


Basis for Adverse Opinion paragraph, the financial statements do not
give the information required by the Companies Act, 2013, in the
manner so required and also, do not give a true and fair view in
conformity with the accounting principles.
Emphasis of Matter paragraph
in an Audit Report

• In a situation where the auditor concludes that it is important to draw


the attention of users of the financial statement to a particular
reported item, he/she may include an Emphasis of Matter paragraph
in his / her audit report. In this case, the auditor is not required to
modify his / her opinion. The paragraph is added when the issue is
not a key audit matter and only requires disclosure for a better
understanding of the financial statements.
Basic Content of an Audit Report
• Audit Report Contents are the basic structure of the audit report which needs
to be clear, providing sufficient evidence providing the justification about the
opinion of the auditors and includes
• Title of Report, Addressee details,
• Introduction
• Responsibility of Auditor & Management
• Scope
• Opinion of Auditor
• Basis of Opinion
• Signature Place & Date

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