What is an Audit Report?
An audit report is a statement usually presented by the external auditors of a company. The audit report provides the auditor’s opinion regarding whether a company’s financial statements are accurate and fair. In official terms, the audit report comments on whether a company’s financial statements present a true and fair view and are free from material misstatements.
The audit report may also come from the internal auditors of a company. While the internal audit report may also contain an opinion from the internal auditors about the financial statements, the focus is different. The goal of an internal audit report is to comment on the internal control systems of the company. These systems usually tie up to the company’s financial statements as well.
Who are the parties involved in an Audit Report?
The audit report usually involves three parties. The first party is the auditors that present the audit report. The auditors of a company are independent of a company’s management. Auditors perform several procedures to gather audit evidence. Based on the collected evidence, they reach conclusions to form an opinion about a company’s financial statements.
The second party involved in the audit report is the client. The client is the company that prepares financial statements. The role of the company and its management in the audit report straightforward. The client prepares the financial statements following the applicable financial standards. Similarly, the client also provides any help to the auditors by providing audit evidence.
Lastly, the final party is the users of the audit report. The users of the audit report include all the stakeholders of the client’s business. The primary user of the audit report is the client business’s owners or shareholders. The audit report is the most useful to its users as it allows them to base their decisions on the opinion presented in it.
What are the opinions presented in the Audit Report?
An audit report shows the auditors’ opinion about whether a client’s financial statements provide a true and fair view. Similarly, it also gives their opinion regarding whether the financial statements are free from material misstatements. In the report, auditors may present four types of audit opinions.
The primary type of audit opinion presented in the audit report is an unqualified opinion. Auditors use an unqualified opinion when they can’t find any problems with the presentation of the audited financial statements. This opinion also signifies that the financial statements are free from material misstatements.
The other type of opinion is a qualified opinion. The qualified opinion means that the auditors may have found some problems with the financial statements. The qualified opinion may also come as an adverse opinion. An adverse opinion implies there are issues throughout the financial statements that can affect the users’ decisions.
Lastly, if the auditors cannot form an opinion due to the lack of evidence, they may present a disclaimer of opinion. Although auditors mention the disclaimer on an audit report, it does not constitute an opinion but shows a lack of opinion.
The audit report is a written statement presented by independent auditors. The audit report presents whether the financial statements of a company show a true and fair view. Similarly, it provides the auditors’ opinion about whether the financial statements are free from material misstatement.
Have an answer to the questions below? Post it here or in the forum