AUDIT REPORT

AUDITING (ACC 3573)

 WHAT IS AUDIT REPORT?
A report containing
the result of the
audit. The report list
all information
pertaining to the
audit in a final,
formal language.
ELEMENTS OF AUDIT REPORT
REPORT TITLE

AUDIT REPORT ADDRESS

INTRODUCTORY PARAGRAPH

SCOPE PARAGRAPH

OPINION PARAGRAPH

NAME OF CA FIRM AND SIGNATURE OF AUDITOR

AUDITOR’S ADDRESS

AUDIT REPORT DATE

 REPORT TITLE

The title must include the word

independent to inform users that the audit
report was unbiased in all aspects
AUDIT REPORT ADDRESS

Addressed to the client’s company, its

stockholders or board of directors
 INTRODUCTORY PARAGRAPH
• a simple statement that the
audit have been done
• to distinguish between audit
and another review report
• list all the financial statements audited
as well as the accounting periods for
those statements
• use the same terms used by the client

• the preparation of financial statements

is the responsibility of the management
• the auditor’s responsibility is to express
opinion on the statements based on the
audit
 SCOPE PARAGRAPH
• states that the auditor followed
auditing standards

• reasonable assurance: indication of an • to indicate that

audit may not completely eliminate sampling was used
material misstatements rather an audit of every
• material: to inform that auditor will only transaction
responsible to detect significant
misstatements that affect user’s decisions
 OPINION PARAGRAPH
• States the auditor conclusions based on the results of the
audit
• in our opinion: indicates that the conclusions was baed on
professional judgments rather than absolute assurance
 NAME OF CA FIRM AND
SIGNATURE OF AUDITOR

The firm’s name is used because it is the

whole firm that is professionally
responsible to ensure that the audit meets
professional standards
 AUDITOR’S ADDRESS

The report should also include a specific

location of the CA firm, which normally will
be stated with the name of the city or town
where it’s located
 AUDIT REPORT DATE

• Indicates the last day of the auditor’s

responsibility for the review of significant
events
• It should be dated on the day when the
partner has signed the report
 TYPES OF AUDIT REPORT

AUDIT REPORT

DEPARTURES
UNQUALIFIED FROM
UNQUALIFIED

EXPLANATORY
STANDARD QUALIFIED DISCLAIMER ADVERSE
PARAGRAPH
 STANDARD UNQUALIFIED
Is sometimes called a clean opinion because there are no
circumstances requiring a modification of auditor’s opinion.
Is to be issued when the following conditions have been
met:
• All statements are included in the financial statements

• The ISAs have been followed in all respects of the engagement

• Sufficient evidence has been accumulated

• The financial statements are presented in accordance with approved

accounting standards
• There are no circumstances requiring the addition of explanatory
paragraph
 EXPLANATORY PARAGRAPH

Unqualified audit report with explanatory paragraph or modified

wording meets the criteria of a standard unqualified audit, but it is
necessary to provide additional information
 EXPLANATORY PARAGRAPH
The following causes should lead to explanatory
paragraph or a modification in the wording of the
standard unqualified audit report:

• Lack of consistent application of approved accounting standards

• Substantial doubt about going concern

• Auditor agrees with a departure from promulgated accounting

principles

• Emphasis of a matter

• Reports involving other auditors

 DEPARTURES FROM
UNQUALIFIED

Scope Inherent
Disagreement
Limitation Uncertainty

occurs when the arise when auditor’s a circumstance that

opinion differs from the outcome cannot
auditor has not
the one expressed be objectively or
accumulated
by management in reasonably
sufficient evidence
FS determined

• non-conformity with legislation

two major causes: Examples are
• non-compliance with standards doubts regarding
1. client’s restrictions
• disagreements - facts/amounts
going concern or the
2. beyond auditor’s outcome of long-
or client’s control • inadequate disclosure term contracts
 DEPARTURES FROM
UNQUALIFIED
QUALIFIED
can be issued when the auditor has been unable to accumulate all of the
required evidence

DISCLAIMER
is issued when the auditor has been unable to satisfy himself/herself that
the overall FS are fairly presented

ADVERSE
is used only when the auditor believes that the overall FS are so materially
misstated and did not fairly present the company’s performance
 EXERCISE:
During the audit of Nusantara Enterprise,
the controller refuses to allow you to
confirm account receivable balances
because he is concerned about complaints
from the customers. You are unable to
satisfy yourself about account receivable
by other audit procedures.

DISCLAIMER
 EXERCISE:
Your client, Saat Sdn Bhd, has incurred
substantial losses in recent years and is
unable to repay the various bank loans
which are falling due. The company’s
ability to continue as going concern entity
is in doubt.

EXPLANATORY PARAGRAPH
 EXERCISE:
L&M Bhd has used the double-declining
balance method to depreciate its machinery.
During the current year, management switched
to the straight-line method because they felt
that it better represented the utilisation of the
assets. You agreed with their decision. All
information is adequately disclosed in the
financial statements.

STANDARD UNQUALIFIED
 EXERCISE:
One month after year-end date, a major
customer of Next Bhd declared bankruptcy. The
directors agreed with you that CK would not be
able to recover the amount from the customer,
but insisted that the amount should only be
written off in the next financial year. You are
expected to issue your auditor’s report two
months after the year-end date.

QUALIFIED
 EXERCISE:
During the year 2006 audit of Winston
Engineering, you found that a material amount
of inventory had been excluded from the
inventory amount shown in the 2005 financial
statements. After discussing this problem with
the directors, you become convinced that it was
unintentional oversight. Retrospective
adjustments had been duly made and the
matter was mentioned in the notes to the
accounts.
STANDARD UNQUALIFIED