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Audit report

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Audit report

  1. 1. Published by Meaning of audit report An audit report is usually of the financial records and accounts of a company. A report is a statement of collected and considered facts, so drawn up as to give clear and concise information to persons who are not already in possession of the full facts of subject matter of the report The audit reporting is the communication of audit conclusions after having carried out the audit process in accordance with audit plan. 1
  2. 2. THE CONTENT OF AUDIT REPORT According to the companies act, duty of the auditor is to make report to shareholder. After review and assessment of conclusions, the auditor’s frames up an overall conclusion. The overall conclusion must concern matters with regard to the following: Whether the financial information disclosed in financial statements has been prepared using acceptable accounting policies. Whether the said policies are consistently applied year after year; Whether the financial information complies with relevant regulations & statutory requirements; 2
  3. 3. continue Whether the view presented by the financial information as a whole is consistent with the auditor’s knowledge of the business of the entity; Whether there is adequate discloser of all material matters relevant to the proper presentation of the financial information. Moreover, Auditor obtain all information; law required all books kept by the company; Attachment of branch audit report with original report; B/S and P/L account are agreed with books of A/Cs and return and B/S and p/L accounts comply with Accounting standard would be the contents of auditor report. 3
  4. 4. Meaning of true and fair view Indicates that the annual accounts to be prepared in a manner to give true and fair view of financial information. Emphasizing on accuracy. Should have particulars required by the articles and the statue. The words “true and fair view” were considered to be fair usage in the place of true and correct view. The expression „true & correct‟ indicated exactitude or precision. Balance sheet and P/L A/C to be true and fair 4
  5. 5. Report vs Certificate Topic Report CertificateMain Informing shareholders about the Giving assurance about theObjective fairness of financial statement correctness of accountsMaking Auditor will make opinion and give Auditor can not make anyopinion & necessary advice about the mistakes opinion or advice about theObjective of accounts accountsWorking area Report area is fixed Area for certificate is not fixedPreparation At the end of the every financial year There is no fixed time table fortime certificateResponsibility Auditor will not be responsible Auditor will be responsibleRisk of Auditor’s risk is huge Risk is lower then reportauditorCriticism Scope for criticism No scope for criticism 5
  6. 6. Basic element of an audit Report a) Title ; b) Addressee c) Opening or introductory paragraph- 1.Identification of financial statement audited and 2.A statement on the responsibility of the entity’s management and that of auditor d) Scope paragraph- 1.A reference to the auditing standards generally accepted in India and 2.A description of work performed by the auditor.e) opinion paragraph- 1.A reference to the financial reporting framework used to prepare the financial statement and 2.Expression of opinion on the financial statement.f)Date of the report; g)Place of signatureh)auditor’s signature. 6
  7. 7. Continue…. 1.Title:The title indicates the nature of report. The title should like-”auditor report” or branch auditor report. The title distinguishes this report from other report like directors report of an accountant report on compilation of the accounts etc. 2. Addressee:The auditor report should address the person to whom it is meant to be forwarded. Generally the report is submitted to the person who appoints the auditor. 3. Opening or introductory paragraphThe introductory paragraph should identify- 1.The financial statement with respect to which audit opinion is given-financial statement are identified by title, period covered, the entity to which it relates etc. 2.The clear making of the responsibility between management and auditor-the report should state that the financial statements are the responsibility of management; the auditor’s responsibility is limited to expression of opinion thereon. 7
  8. 8. Continue… 4.Scope paragraph:The scope paragraph should indicate that auditor had planned and performed the audit to obtain reasonable assurance whether financial statement are free from material misstatement. 1.Examining on a test basic, evidence to support the accounts disclosures in financial statement. 2.Examineng accounting principles used in the preparation of financial statement. 3.Evaluating the overall financial statement presentation. 5.Opinion paragraph:The opinion paragraph of the report should indicate the financial reporting framework used to prepare the financial statement and state the auditors opinion as to whether the financial statement given a true and fair view in accordance with that financial reporting framework and comply with the statuary disclosure requirements. 8
  9. 9. Continue… 6.Date of the report:The date of report indicate the date on which the auditor signs his report. it indicates that the auditor has considered the effect on the financial statements and also on his reports of events occurred upto that date. 7.Place of report:The town in which the audit report is signed should be indicated. 8.Audiors signature:The report should be signed by the auditor in his personal name. where the firm is auditors of the entity, the signature should be in the personal name of the partner as well as in the firm name . 9
  10. 10. Statutory Requirement of Auditor’sReport There is no mandatory reporting requirement under section 227 (1A), the auditor is specially required to inquire in respect of six matters specified. He can report if results of inquiry so warrant. The matters to be inquired are: (1) Whether loans and advances made by the company on the basis of security have been properly secured and whether the terms on which they have been made are not prejudicial to the interest of the company or its members. (2) Whether the transactions of the company which are represented merely by book entries are not prejudicial to the interests of the company. 10
  11. 11. Continue (3) Whether the loans and advances made by the company have been shown as deposits.(4)In case of companies other than investment companies or banking companies, whether the shares, debentures, or other securities have been sold at prices less than the porches price. (5) Whether personal expenses have been charged to revenue account. (6) If shares have been allotted for cash, whether the cash has been actually received, If not whether the position is correctly stated in the balance sheet in a manner that is correct and misleading. 11
  12. 12. Qualification of good report It should be based on factual information It should be convincing It should be forceful It should be unbiased It should be point out mistakes It should be a constructive criticism and not be in reprimanding tone It should be brief. If it is lengthy , the object of the report is defeated even if it is well written. 12