Audit report is an end product of auditing, auditing main intention is to generate audit report.......

2. An audit report is a statement through which an
audit or submits his findings and expresses his
opinion on the state of affairs of the company’s
Business impartially .

3. “The auditor is required to make a report to the member of
the company –
a) On the accounts examined by him, and
b) On every balance sheet and profits and loss account ; and
c) On every other documents declared by the act, to be
annexed to the balance sheet and profit & loss account
which are laid before the company in the general meeting
during his term of office. Such a report is known as the
auditor’s report.”

4. Nature of audit report
verification
Internal
control
Audit
report
It is the medium through
which an auditor express his
opinion on the financial
statement.
It is the end product of audit.
It is based on factual
information.

5. 4) The audit report may
be short or long.
5) The audit report may
be in the form of letter
or statement.
6) The audit report is
attached to the balance
sheet.

6. IMPORTANCE OF AN AUDIT REPORT
It is a statutory requirement in the case of a company
audit.
It is the end product of audit. It summarizes the result
of the audit work done by the auditor.
It is the medium through which an auditor submits his
findings and expresses his opinion on the state of
affairs.
An audit report ensures to the shareholder that the
accounts of the company are properly maintained.
It is evidence in the court of law

7.  Unqualified Opinion
 Qualified Opinion
 Disclaimer of Opinion
 Adverse Opinion

8. An unqualified opinion is expressed when
the auditor concludes that the financial statements
give a true and fair view in accordance with the
financial reporting framework used for the
preparation and presentation of the financial
statements. It indicates that:-
 Generally accepted accounting principles are
consistently applied in the preparation of financial
statements;
Financial statements comply with the relevant
statutory requirements and regulations; and
 There is adequate disclosure of all material
matters relevant to the proper presentation of
financial information (subject to statutory
requirements)

10. In situations when a company’s financial records
have not been maintained in accordance with GAAP but
no misrepresentations are identified, an auditor will issue
a qualified opinion. The writing of a qualified opinion is
extremely similar to that of an unqualified opinion. A
qualified opinion, however, will include an additional
paragraph that highlights the reason why the audit
report is not unqualified.

11. A qualified report is given by an auditor under the following
circumstances:
1) When he is not satisfied with the accounts or financial
statements.
2) When proper books of accounts as required by law have
not been maintained.
3) When there is a violation of the companies act
4) Where report is a material misstatement in the financial
statement.
5) Where there is an omission of a material disclosure.

12. 6) When the explanations sought by the auditor
are not made available to him.
7) Where the assets are over or under valued.
8) Where secret reserve have been created.
9) Where there is insufficient provision for
depreciation.
10) Where there is inadequate provision for bad
and doubtful debts.

14. The worst type of financial report that can be issued to
a business is an adverse opinion. This indicates that the firm’s
financial records do not conform to GAAP. In addition, the
financial records provided by the business have been grossly
misrepresented. Although this may occur by error, it is often an
indication of fraud. When this type of report is issued, a
company must correct its financial statement and have it re-audited,
as investors, lenders and other requesting parties will
generally not accept it.

16. Qualified Report Adverse Report
I . A Qualified Audit Report is one an
Auditor . gives an opinion subject to
certain reservations.
An Adverse Report is given when the
concludes that based on his examination,
he does not agree with the affirmations
made in the Financial Statements /
Financial Report.
ii. The Auditor's reservation is generally
Stated as: "Subject to the above, we report
that the Balance Sheet shows a true and
fair view."
The Auditor states that the Financial
Statements do not present a true and fair
view of the state of affairs and working
results of the organisation.
iii. The accounts present a true and fair
view subject to certain reservations.
The accounts do not present a true and
fair view on the whole.
iv. A Qualification is made in the Audit
Report when the Auditor has reservation
on specific item(s) of material nature.
An Adverse Report is given when the
Auditor has his reservations on the true
and fair view presented by the Financial
Statements.

17. Disclaimer of Opinion :-
On some occasions, an auditor is unable to
complete an accurate audit report. This may occur
for a variety of reasons, such as an absence of
appropriate financial records. When this happens,
the auditor issues a disclaimer of opinion, stating
that an opinion of the firm’s financial status could
not be determined.

20. Basis Report Certificate
Meaning An auditor’s report is merely
an expression of the auditor’s
opinion on the financial
statement of a business.
An auditor’s certificate is
the declaration as to the
truthfulness of a
statement given by a
person.
Base It is based on facts, estimates
and assumptions
It is based only on facts.

21. Basis Report Certificate
Guarantee It is not guaranteed
of the absolute
correctness and
accuracy of the
financial statements.
It is a guarantee of
the absolute
correctness and
accuracy of the
financial statements.
Authentication If a signed report by
an auditor is wrong,
the auditor cannot be
held responsible.
If a duly signed
certificate by an
auditor is wrong, the
auditor
will be responsible.

23. Audit Committees: -
An audit Committee is a subcommittee of
the board of Directors formed for the purpose of
reviewing the annual financial statements
before their submission to the Board of
Directors, assisting the Board of Directors in
discharging their function efficiently and for
acting as a liaison between the board of
directors and the external auditor.

24. Nature and composition
The setting up of audit Committee has been supported by
Stock Exchange, Corporate law authorities, Professional
accounting bodies.
The Composition of audit Committee depends mainly
up on the nature and the size of the business. An audit
committee, generally, consists three to five members.

25. Functions of Audit Committee are: -
1. To consider questions of appointment, resignation,
dismissal, remuneration of the auditor.
2. To discuss the nature and scope of duties of external
auditor.
3. To review the half yearly and annual financial statements.
4. To discuss the issues and problems arising from the audits.
5. To assist the Board of Directors in the fulfilment of their
duties and responsibilities.
6. To evaluate the efficiency of the working of the Board of
Directors