What is Audit Report
Audit report is the report generated by the external auditors who are known as independent accounting professionals and this report is generated by them for the shareholders of the company. This report tells about the assets, liabilities of the company and also about the present financial position of the company. The Audit report issued in the annual report of the company with in concurrence with the financial statements like income statement, balance sheet and cash flow statements follow the generally accepted accounting principle (GAAP).
An audit report consists of three main paragraphs. In the first paragraph of the auditor report the duties and responsibilities of the directors and auditors are mentioned. In the second paragraph the scope is mentioned that generally accounting principles were followed in generating this report. And in the third paragraph the auditor mention his opinion about the about the company.
Types of Audit Report
There are four main types of Audit Report;
- Unqualified opinion
- Qualified opinion
- Adverse opinion
- Disclaimer Opinion
Unqualified Opinion
Unqualified opinion is usually known as clean opinion. It is published in the annual report of the company when the auditors find that the financial statements provided by the company to its shareholder or to public are fraud free or is free of any misrepresentation. And in addition unqualified report also clarifies that the financial records provided by the company follows the rules and regulation of the generally accepted accounting principles and along with that it also follows the rules and regulations set by the National standards.
The unqualified report consists of the title independent that means that the report is generated by an independent person who was not under the influence of any other person or party.
Qualified Opinion
Qualified opinion is issued when the auditors finds out that the financial reports provided by the company to the shareholder and general public are not fair and true but there exist a misrepresentation of information or fraud. Qualified opinion is also issued when the auditors identifies that the financial records of the company do not follow the rules and regulations of the generally accepted accounting principles or the rules and regulation set by the National standards. However the auditor will also provide an extra paragraph at the end of the qualified report in which he will mention or highlight the reasons on the basis of which the report is qualified.
Adverse Opinion
Adverse opinion is the worst kind of audit report that can be published for the company. Because when this audit report is issued for the company it indicates that the company neither follows the rules and regulations of the generally accepted accounting principles nor the rules and regulations of the National standards. And along with this the financial statement provided by the company to its shareholders and general public are not only misrepresented but there also exist the factor of the fraud. When this kind of opinion is issued for the company then the company is required to correct its balance sheet, cash flow statement and income statement.
Disclaimer Opinion
Disclaimer opinion is issued for the company when during the audit by the external auditors the financial data required by them is incomplete means that either the balance sheet is not present or some data is missing from any of the financial statement, so in that case the external auditor publishes a disclaimer report for the company.
March 15, 2019