Minali Jain - 20130128
Dushyant Bhati - 20130399
Dr. Siddharth Jain
Audit report is the presentation of collected and considered
facts. It is prepared in such a way that those people who do not
have information about the matter of the report can be informed
clearly in brief. According to Section 227 (2) of Companies Act, it
is auditor’s duty to verify the accounts of the company carefully
and give a report about whether the accounts present true and fair
condition of the
Company or not ?
TRUE AND FAIR CONCEPT
After verifying accounts of the company, Auditor has to give a
report whether the accounts of the company present “true and fair”
economic condition of the company or not ? In that case, it is
necessary to understand what the meaning of words is “true and
It can be said that the accounts of the company show “true and
fair” economic condition of the company only when accounts have
been prepared according to the accounting principles and accounting
methods, capital and revenue transactions have been allocated
properly, information is given according to the second part of
residual-6 of Companies Act, total information is given as per
provisions of law and shown in law.
All the assets and liabilities of the company shown
in the balance sheet of the annual accounts are
presented properly, means no assets or liabilities of the
company have been left, or have not been shown
wrong, its valuation has been done according to the
accepted principles, there is provision or depreciation
on fixed assets, contingent liability is shown with
provision regarding it. Thus, if the real condition of
assets and liabilities shown in the balance sheet, it is
called “true and fair” condition.
MEANING OF AUDIT
. A report prepared by the auditor after examining the
accounts of a company is called Audit Report
Audit report is the medium through which an auditor
expresses his opinion on the financial state of affairs of the
clients business. It summarizes the results of the audit
work conducted by the auditor.
“A Report is a statement of collected and considered facts, so drawn up as to
give clear and concise information to persons, who are not already in
possession of the full facts of the subject matter of the report.”
BASIC ELEMENT OF
3. Opening or Introductory Paragraph
4. Scope Paragraph
5. Opinion Paragraph
6. Date of Report
7. Place of Signature
8. Auditor’s Signature
IMPOTANCE OF AUDIT
1. Importance to the share holders:
2. Importance to the Directors:
3. Importance to the Creditors of the Company:
4. Importance to the Debenture holder of the Company:
5. Importance to the Investors:
6. Importance to the Government:
TYPES OF AUDIT REPORT
1- Clean Report
Its also known as Unqualified Report. It is given by the
auditor if he is satisfied with the fairness of Balance
Sheet and Profit and Loss account with all the contents
of the financial statements and he is satisfied with
evidences, documents and explanation given by his
If no defect, illegal act, frauds are detected during the
verification of the accounts of the company and if profit
and loss account in the annual account of the company
presents true and fair profit or loss and balance sheet
shows true and fair economic condition as of the date
and auditor presents whatever report are called clean
report. Clean report is also called Report Without Defect
or Routine Report or Regular Report.
2 - Qualified Report:
When the auditor is not satisfied with the accounts presented to him if he
finds any discrepancy in the recording of the transaction, if he thinks that the
Balance Sheet and P&L account do not exhibit true and fair view of the
business then he submits Qualified Report.
During the verification of the accounts of the company, any defect, illegal
act, frauds, breach of provision of law is detected and the profit loss account
does not show true and reasonable profit or loss of the concluding year and
balance sheet does not show the true and fair economic condition as of that
date, when auditor gives report about it is called qualified audit report. This
type of audit is also called Improved Report or Limited Report.
1. It’s a continuous process
carried out throughout the
1. It’s a one time activity
after the closure of
2. No prescribed qualification is
required to be an accountant.
2. He must be the
member of Institute of
Chartered Accountants of
India to become an auditor.
3. An accountant is a
employee of the company.
3. An auditor is an
4. An accountant gets regular
salary for his work.
4. He gets remuneration
for his professional work.
5. Accounting is concerned
with recording of business
6. Accounting precedes,
5. Its concerned with
verification of accounts
prepared by the accountant.
6. Auditing succeeds