Audit Report Examples provides the example of the different audit report on the condition of the financial situation and internal accounting of the different companies which is given by the auditor after reviewing the different documents and financial statements.
Audit Report Examples
An audit reportAn Audit ReportAn audit report is a document prepared by an external auditor at the end of the auditing process that consolidates all of his findings and observations about a company's financial statements. contains the opinion of independent auditors about the company’s financial statements such as Income Statement, Balance Sheet, Cashflows, and Shareholders’ equity statement. Auditor reports can be found in companies’ annual reports just before the financial page.
There can be following variations in an auditor report opinion examples:
- #1 – Clean Opinion: If the auditor is satisfied with the financials and as per him/her, these are of fair presentation.
- #2 – Qualified Opinion: In this type of report, the auditor will state limitations faced while auditing.
- #3 – Adverse Opinion: If the statements are not correctly stated.
Below are some practical examples and samples of the Audit ReportSamples Of The Audit ReportAudit report format is the standardized format prescribed by the concerned authority using which an independent auditor appointed by the company gives its views and comments on the company’s financial condition and internal accounting after analyzing the various documents of the company. to understand it better. These reports have taken from annual reports of companies:
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Audit Report Example of Facebook
Below is the auditor report example for Facebook, which is a U.S company, so it should be compliant with GAAP rules. This report has been taken from the Facebook annual report for 2018. AuditorAuditorAn auditor is a professional appointed by an enterprise for an independent analysis of their accounting records and financial statements. An auditor issues a report about the accuracy and reliability of financial statements based on the country's local operating laws. for Facebook is Ernest &Young.
It has provided its audit report in 5 points which have been mentioned below:
#1 – Opinion on the Financial Statements
In the first paragraph, the auditor has indicated they have an audited balance sheet, Income StatementIncome StatementThe income statement is one of the company's financial reports that summarizes all of the company's revenues and expenses over time in order to determine the company's profit or loss and measure its business activity over time based on user requirements., Shareholder’s Equity, and Cashflow Statement of the company for the last 3 years. Also, they have checked all the related notes, which explain the basis for the numbers and some accounting guidelines. Based on the audit, EY is confirming that financials are in accordance with GAAP (Generally Accepted Accounting Principles)GAAP (Generally Accepted Accounting Principles)Generally accepted accounting principles (GAAP) are the minimum standards and uniform guidelines for the accounting and reporting. These standards prohibit firms from engaging in unethical business activities and enable for a more accurate comparison of financial reports to investors. standards. Based on the report, they have provided an unqualified clean opinion; it means the auditor is satisfied with the financials provided.
#2 – A Basis for Opinion on Financial Statements:
In this part, the auditor mentioned that in their audit, they check to see any error, misrepresentation, or fraud in the data provided. They have taken some test cases to check the amounts that are provided in the financial. Also, they have tested the accounting principlesAccounting PrinciplesAccounting principles are the set guidelines and rules issued by accounting standards like GAAP and IFRS for the companies to follow while recording and presenting the financial information in the books of accounts. which was used by management.
#3 – Opinion on Internal Control Over Financial Reporting
In this part, an auditor has checked whether the company is having control over its finances as regulated by COSCO (Committee of Sponsoring Organization) and PCAOB (Public Company Accounting Oversight Board). E.Y. has audited Income Statement, Balance Sheet, Cash FlowCash FlowCash Flow is the amount of cash or cash equivalent generated & consumed by a Company over a given period. It proves to be a prerequisite for analyzing the business’s strength, profitability, & scope for betterment. , and Shareholder’s Equity for this purpose.
#4 – The Casis for Opinion:
Here auditor mentioned their process for forming the opinion. They have mentioned that formally audit has been done to confirm whether the control mentioned by management over the financial are reasonable.
#5 – Definition and Limitation of Internal Control Over Financial Reporting:
Here the auditor tells about the procedures which can be used for internal controlInternal ControlInternal control in accounting refers to the process by which a company implements various rules, policies, or procedures to ensure the accuracy of accounting and finance information, safeguard the various assets of the business, promote accountability in the business, and prevent the occurrence of frauds in the company. such as “provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,” etc. Because of some limitations, there can be cases that, even after adequate internal control, there can be some misstatements. Auditor has also mentioned the same in this report.
Audit Report Example of Tesco Plc
Tesco is a multinational grocery company in the U.K. It is the third-largest retailer in the world by revenueRevenueRevenue is the amount of money that a business can earn in its normal course of business by selling its goods and services. In the case of the federal government, it refers to the total amount of income generated from taxes, which remains unfiltered from any deductions.. Below is the snippet of the auditor report for FY 18, which has been prepared by Deloitte. If we compare from the auditor report example for Facebook, which has been mentioned above, the audit report example for Tesco seems to be more elaborative and larger in size and nature.
Below are some main parts of the sample audit report.
Opinion: As per Deloitte, their financial statements and basis for statements are as per IFRS (International Financial Reporting Standards). For their auditing, they have selected Group Income Statement, Group Statement of Comprehensive IncomeStatement Of Comprehensive IncomeStatement of Comprehensive Income refers to a financial performance statement prepared monthly, quarterly, or yearly, other than the Income Statement. It records the details of the company's unrealized revenue, income, expenses, or loss when a company prepares the financial statements of the accounting period., Group and Parent Company Balance Sheet, Statement of Change in equity, Cash flow statementCash Flow StatementStatement of Cash flow is a statement in financial accounting which reports the details about the cash generated and the cash outflow of the company during a particular accounting period under consideration from the different activities i.e., operating activities, investing activities and financing activities., and related notes.
The basis for Opinion: In this part, auditors mentioned that conducted audit is in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable laws.
Summary of audit approach: In this part, at first auditor specified the critical matters for audit which are-
- Store impairment review;
- Recognition of commercial income;
- Inventory valuation;
- Pension obligation valuation;
- Contingent liabilitiesContingent LiabilitiesContingent Liabilities are the potential liabilities of the company that may arise at some future date as a result of a contingent event that is beyond the company's control. ;
- Presentation of the Group’s income statement;
- Retail technology environment, including IT security, and formed their opinion on the above matters. Also, they provided their scoping of the audit.
Conclusions relating to going concerned: In this part, Auditors have reviewed the statements that have provided by the Directors of the company as we know that an organization is meant to be a going concern. So, auditors are checking here whether the directors have used the accounting standard, keeping in mind that the company is a going concern. Also, auditors have checked the uncertainties and the company’s ability to continue for at least the next 12 months forward. As per Deloitte, they have nothing to add or draw attention related to that.
Principal Risk and Viability Statement: In this portion, Deloitte mentioned their views on what kind of risks and statements are mentioned by directors and how they are being mitigated. Auditors have checked the statements of Directors that how the prospects of groups are assessed by them and for that what and how they have taken the time frame. Auditors also want to examine whether the Directors have an explanation of how the liabilities of companiesLiabilities Of CompaniesLiability is a financial obligation as a result of any past event which is a legal binding. Settling of a liability requires an outflow of an economic resource mostly money, and these are shown in the balance of the company. will be met by the firm in the future. Auditors want the Directors to disclose any such liabilities, which can have an issue in the future. Based on that, they prepare a report. Deloitte confirms that they have nothing material to report.
Above, we have taken an audit report sample example of one US company that is compliant as per GAAP and one UK company, which is as per IFRS compliant. Though the principal of both the reports is the same, the report for UK company is showing elaborative information and providing an explanation of all the critical audit matters, which should be quite helpful in making an independent view of the firm by an analyst.
This has been a guide to Audit Report Examples. Here we discuss Types of Audit report opinion and Sample Audit Report examples, including Facebook, Tesco Plc. You can learn more about financing from the following articles –