Audit Report Format is the standardized format prescribed by the concerned authority using which independent auditor as appointed by the company in this regard, give its views and comments on the company’s financial condition as well as internal accounting after analysis the various documents of the company.
What is the Format of the Audit Report?
An Audit ReportAudit 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. is a report describing the financial condition and internal accounting controlsAccounting ControlsAccounting controls comprise the methods and procedures a company adopts for verifying the accuracy, validity and transparency of its financial statements. An organization takes this measure to ensure its business operations' efficiency; it has nothing to do with the legal compliance and regulations. by an independent auditor. The board of directors, the stakeholders of the organization, shareholders, investors, etc. use this report. The auditor must be meticulous and unbiased while preparing the report. It is the responsibility of the Auditor to make this audit report in the standardized format every year after reviewing the financial statements of the organization.
Investors tend to rely on the auditor’s report before investing in any company. The Audit Report provides a clear picture of the financial health of the company without having to analyze the reports on your own. The report gives a reliable summary of an organization’s financial health.
An auditor’s report describes the audited financial statementsFinancial StatementsFinancial statements are written reports prepared by a company's management to present the company's financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels. in the introductory paragraph. The scope paragraph gives a brief on the nature of the audit. The auditor expresses their opinion in the opinion paragraph.
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Audit Report Format
The audit report format is as follows –
- Introductory Paragraph
- Management’s Responsibility
- Auditor’s Responsibility
- Basis of the Opinion
- Other Reporting Responsibility
- Signature of the Auditor
- Place of Signature
- Date of Audit Report
Let us discuss the above format of the audit report in detail.
#1 – Title
The title should mention – ‘Independent Auditor’s Report.’
#2 – Addressee
The addressee should mention as to whom the report is being presented.
#3 – Introductory Paragraph
A statement that the financial statements described in the report have been audited.
#4 – Management’s Responsibility
This section of the audit reports format should mention the Management’s Responsibility to the integrity of the financial statements, which gives an overview of the financial condition, cash flows of the CompanyCash Flows Of The CompanyCash 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 financial performance. The responsibility also includes the maintenance of accounting records to prevent fraud. It is their responsibility to formulate and execute necessary financial controls to ensure the accuracy of the financial records. It should mention that the financial statements are the responsibility of the organization’s management.
#5 – Auditor’s Responsibility
The Auditor’s responsibility mentioned is to depict an unbiased opinion on the financial statements and issue an audit report. The report basis upon Standards on Auditing. The Standards require that the auditor complies with ethical requirements. It is the auditor’s responsibility to plan and execute the audit to procure assurance regarding the financial statements.
#6 – Opinion
The most critical content in an Audit ReportContent In An Audit ReportAudit Report Contents represent the basic structure of an audit report that needs to be transparent, providing sufficient evidence to justify the auditors' opinion. It includes the report's title, addressee details, opening paragraph, scope paragraph, opinion paragraph, signature, place of the signature, and date of the report. is the Auditor’s Opinion. It mentions the impression derived after auditing the financial statements.
#7 – Basis of the Opinion
It should mention the basis of achieving the opinion as reported and the facts of the premise.
#8 – Other Reporting Responsibility
Any other responsibility relating to reporting exists, the auditor has to mention the same. It may include Regulatory requirements.
#9 – Signature of the Auditor
The auditor needs to sign the audit report, thereby confirming the authenticity of the report.
#10 – Place of Signature
The name of the city in which the signing of the report happened.
#11 – Date of Audit Report
The date on which the audit report is signed/reported;
Sample Audit Report Format Example:
Below mentioned is a sample format of an Auditor’s Report :
Independent Auditor’s Report
To the Members of X Company
Report on the Financial Statements
We have audited the accompanying consolidated balance sheets of X Company (the Firm) as of December 31, 20XX, and the related statements of income, comprehensive income, retained earningsRetained EarningsRetained Earnings are defined as the cumulative earnings earned by the company till the date after adjusting for the distribution of the dividend or the other distributions to the investors of the company. It is shown as the part of owner’s equity in the liability side of the balance sheet of the company., changes in stockholders’ equity and cash flows for the year then ended, and a synopsis of the accounting policiesAccounting PoliciesAccounting policies refer to the framework or procedure followed by the management for bookkeeping and preparation of the financial statements. It involves accounting methods and practices determined at the corporate level. and other information. We also have audited the Firm’s 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. over financial reporting as of December 31, 20XX.
Management’s Responsibility for the Financial Statements
These financial statements are the responsibility of the Firm’s management. The Firm’s Board of Directors is responsible for the matters with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Firm in accordance with accounting principles generally accepted Accounting Principles Generally AcceptedGenerally 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. in the United States of America.
Our responsibility is to express an opinion based on our audit on these financial statements. The audit has been conducted in accordance with the auditing standards generally accepted in the United States of America. The standards necessitate us to plan and perform the audit to gain assurance on the authenticity of the financial statements and to ensure that it is free from any misstatements or possible frauds. The audit includes inspection of the amounts and disclosures in the financial statementsDisclosures In The Financial StatementsDisclosure Statement is an official document that is part of a list of documents issued by a person, an organization, or the government and contains various key and relevant information in a non-technical language for the communication of contract terms to other parties or contractees, who are typically naive to jargons.. The audit will provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present justly, the financial position of X Company as of December 31, 20XX, conforms to 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. generally accepted in the United States of America. Also, in our opinion, the Firm maintained effective internal control over financial reporting as of December 31, 20XX.
This article has been a guide to the Audit Report Format. Here we discussed the basic contents of an Auditor’s report format along with the sample audit report example to understand it better. You can learn more about accounting from following articles –