Intro to Audit Report - Auditing & Secretarial Practice | Auditing and Secretarial Practice - B Com PDF Download

AUDIT REPORT :

An audit report is a statement through which an auditor submits his findings and expresses his opinion on the state of affairs of the company’s business. In other words, it is a statement through which an auditor summarizes result of his audit work. In short it is the medium through which an auditor expresses his opinion on the financial statement of a business.

Characterstics of Audit Report

1) It is the medium through which an auditor expresses his opinion on the financial statement.
2) It is the end product of audit.
3) It is based on factual information.
4) The audit report may be short or long.
5) The audit report may be in the form of letter or statement.
6) The audit report is attached to the balance sheet.

Importance of an Audit Repoprt

It is a statutory requirement in the case of a company audit. It is the end product of audit. It summarizes the result of the audit work done by the audit.
It is the medium through which an auditor submits his findings and expresses his opinion on the state of affairs
An audit report ensures to the shareholder that the accounts of the company are properly maintained. It is evidence in the court of law

Contents of Audit Report

An audit report has to contain matters as per section 227(3) of the companies act of 1956 the audit report of a company cannot contain the following matters:

1. Whether he has obtained all the information and explanation.
2. Whether proper books of accounts as required by law have been kept by the company.
3. Whether the company’s balance sheet and profit and loss account are in agreement with the books, accounts and returns.
4. Whether any other statements have been concluded as required by the central govt.
5. Whether in his opinion

a) Balance sheet represents true and fair view of the state of affairs.

b) Profit and loss account represents correct profit or loss for the financial year.

Essentials of an Audit Report

1. It must be a statement of facts.
2. The report must contain the auditor’s opinion.
3. The report should not give vague statement.
4. The report should be convincing.
5. The report must be coherent.
6. It must be simple to understand.
7. It must be forceful.
8. It should be unbiased.
9. The information given in the report should be clear and concise.
10. The report must convey to the client the material facts known to the auditor.
11. The report must be signed by the auditor.
12. The report must be attached to the balance sheet.

Types of Audit Report

1). Clean or unqualified report

When an auditor is satisfied with the affairs of the company and the fairness of the balance sheet and profit and loss account of the concern, he gives in his report the various matters without any reservations, qualifications or modifications. Such a report is called a clean report or unqualified report. A clean report is given by an auditor when he is satisfied as to the truthfulness and fairness of the accounts and the financial statements of the company 

2). Qualified or Adverse Report

When an auditor finds some irregularities in the books of accounts or in the financial statements, the auditor gives a report mentioning the irregularities. Such a report is called a qualified report. A qualified report is a report in which the auditor inserts any qualifications, modifications or reservations.

A qualified report is given by an auditor under the following circumstances:

1. When he is not satisfied with the accounts or financial statements.
2. When proper books of accounts as required by law have not been maintained.
3. When there is a violation of the companies act
4. Where report is a material misstatement in the financial statement.
5. Where there is an omission of a material disclosure.
6. When the explanations sought by the auditor are not made available to him.
7. Where the assets are over or under valued.
8. Where secret reserve have been created.
9. Where there is insufficient provision for depreciation.
10. Where there is inadequate provision for bad and doubtful debts.

Auditing In Electronic Data Processing Environment (EDP) 

Computerized information system environment or electronic data processing environment means an environment where computers are extensively used in an enterprise for the processing of significant financial information. In other words, data processing done with the help of electronic computers is popularly known as electronic data processing or computerized information system (CIS) environment.