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PREPARED BY : RATNA   DEWI A/P PALANIAPPAN
 Meaning of audit report : Is a signed written document which present the purpose  ,scope and result of the audit. resul...
 to avoid confusion to the readers, it is  important for the auditing profession to  adopt conventional and uniform wordi...
5.1.3 Overview type of audit reportImmaterial                                                                     Unqualif...
Two type of circumstances               disagreementAuditors disagrees with management aboutmatters such as selection of a...
type of report        Adverse Opinion                                Qualified OpinionIt is used only when the auditor bel...
•Emphasis   of matter or significant uncertainly•Audit agrees with a departure from approved accounting                   ...
5.1.4 situations which resulted in eachtype of the audit report being release   Materiality Significance in Terms of      ...
CONDITION                      MATERIALITY LEVEL TYPE OF REPORT                  COMMENTS                                 ...
SHOULDITEM                                                                      AUDITORS                               TYP...
1.    Title of report.-    The auditor’s report should be appropriately titled so that it is clear     to the user that th...
2. Addressee.-   The auditor’s report should be appropriately addressed as required    by the purpose and circumstances of...
4. management’s responsibility.-   The act requires the directors of the company to present at the    AGM financial statem...
6. Scope paragraph.- should make reference to established auditing standards andcommunicate to the members, in very genera...
7. Opinion paragraph.-   should contain a clear expression of opinion unless the auditor is    unable to do so.-   should ...
8. Other reporting responsibilities- to expressing an opinion on the financial statements arise mainlyfrom statutory or re...
10. Date of report.-   All audit reports should be dated.-   dated as of the date on which the auditor has completed all  ...
 Page   592 (example unmodified report)-   Title-   Addressee-   Management’s responsibility-   Scope paragraph-   Opinio...
 obtaining reasonable assurance that the financial  statements as a whole are free from material  misstatement. to expre...
 An  audit involves performing procedures to obtain  audit evidence about the amounts and disclosures  in the financial s...
 Limitation  on Scopea. Imposed by the entity-   the auditor would ordinarily not accept such a    limited engagement as ...
a.  The emphasis of matter paragraph- would ordinarily to highlight a material  matter regarding a going concern problem.b...
c.  amendment to other information- in a document containing audited financial  statements is necessary and the entity ref...
Audit Report
Audit Report
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Audit Report

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Audit Report

  1. 1. PREPARED BY : RATNA DEWI A/P PALANIAPPAN
  2. 2.  Meaning of audit report : Is a signed written document which present the purpose ,scope and result of the audit. result of audit may include findings, conclusion (opinion), and recommendations. Objective: the auditor express his opinion and with evidence in the form of a report which is referred to as the auditor’s report. the auditor report is to addressed to the shareholders of the company but it is also read by other such as bankers, creditors, and other parties who use the information in the financial statements.
  3. 3.  to avoid confusion to the readers, it is important for the auditing profession to adopt conventional and uniform wording in auditors report. To avoid misunderstanding in the audit report message that being communicated to the users of the financial statements. 5.1.2Type of audit report -unmodified report -modified report
  4. 4. 5.1.3 Overview type of audit reportImmaterial Unqualified with unqualifie - modified wording or emphasis of d explanatory paragraph limitation on scope disagreement matter , e.g: going concernuncertainty othersignificant uncertaintyMaterial Qualified Qualified limitation on scope disagreementMaterial andPervasive Disclaimer Adverse
  5. 5. Two type of circumstances disagreementAuditors disagrees with management aboutmatters such as selection of accountingpolicies or method of their application, thisrepresentative non-compliance withapproved accounting standard by the entity. Limitation on scope This refers to the limitation on the scope of the auditor’s works. this will result in a lack of audit evidence, due to the auditor inability to obtain the information.
  6. 6. type of report Adverse Opinion Qualified OpinionIt is used only when the auditor believes A qualified opinion report can result fromthat the overall financial statements are a limitation on the scope of the audit orso materially misstated or misleading that failure to follow generally acceptedthey do not present fairly the financial accounting principles.position or results of operations and cashflows in conformity with GAAP. Disclaimer of Opinion Unqualified Audit Report It is issued when the auditor is unable The financial statements are presented in to be satisfied that the overall financial accordance with generally accepted statements are fairly presented. accounting principles.
  7. 7. •Emphasis of matter or significant uncertainly•Audit agrees with a departure from approved accounting standard •Substantial doubt about going concern •The report is a share report involving the other auditors •Lack of consistent application of approved accounting.
  8. 8. 5.1.4 situations which resulted in eachtype of the audit report being release Materiality Significance in Terms of Type of Level Reasonable Users’ Decisions Opinion Users’ decisions are unlikely Immaterial to be affected. Unqualified Users’ decisions are likely Material to be affected. Qualified Highly Users’ decisions are likely Disclaimer material to be significantly affected. or adverse
  9. 9. CONDITION MATERIALITY LEVEL TYPE OF REPORT COMMENTS because the client refuses to allow the auditor to expand Scope of the audit has been the scope of his audit, a disclaimer of opinion is Highly material Disclaimerrestricted appropriate rather than a qualified as to scope and opinion. Highly material or material. We need additional The materiality of twenty percent of net earnings before Adverse (if highly information taxes would be sufficient for many auditors to require anFailure to follow GAAP material)or Qualified (if regarding the adverse opinion. That materiality question is a matter of material) auditors preliminary auditor judgment. judgment about materiality Lack of independence by audit personnel on the Disclaimer engagement mandates a disclaimer for lack ofLack of independence Not applicable independence. The company has made a decision to follow a differentNone Not applicable Unqualified financing method, which is adequately disclosed. There is no change of accounting principle. The auditor cannot issue an unqualified opinion on the income statement or the statement of cash flows because a disclaimer of opinion is necessary for theScope of the audit has been beginning balance sheet. The auditor may issue an Highly material Disclaimerrestricted unqualified opinion on the ending balance sheet and a disclaimer of opinion on the income statement, statement of cash flows, and the beginning balance sheet. The auditor is able to satisfy him or herself that with theScope of the audit has been Highly material Unqualified use of alternative procedures, a qualified opinion is notrestricted necessary.
  10. 10. SHOULDITEM AUDITORS TYPE OF CHANGE NO. REPORT BE MODIFIED? 1 An error correction not involving an accounting principle. no An accounting change involving a correction of an error in 2 principle, which is accounted for as a correction of an error. yes An accounting change involving a change in the reporting entity, 3 which is a special type of change in accounting principles. yes An accounting change involving both a change in accounting principle and a change in accounting estimate. Although the effect of the change in each may be inseparable and the accounting for such a change is the same as that for a change in 4 estimate only, an accounting principle is involved. yes An accounting change involving a change from one generally accepted accounting principle to another generally accepted 5 accounting principle. yes An accounting change involving a change in an accounting 6 estimate. no 7 Not an accounting change but rather a change in classification. no An accounting change from one generally accepted accounting 8 principle to another generally accepted accounting principle. yes
  11. 11. 1. Title of report.- The auditor’s report should be appropriately titled so that it is clear to the user that the financial statements have been audited.- The title will also distinguish the auditor’s report from reports for non-audit engagements and other statements contained in the annual report such as the director’s report or the chairman’s statement.
  12. 12. 2. Addressee.- The auditor’s report should be appropriately addressed as required by the purpose and circumstances of the engagement.- For audit of financial statements under the Companies Act, the auditor’s report must be addressed to the members or shareholder of the company.3. Introductory paragraph.- Should state clearly that the financial statements have been audited.- It should also identify the financial statements that have been audited by stating the name of the entity, title of the financial statements and the date and period covered by the financial statements.- When the audited financial statements are contained in an annual report, the auditor may identify them by referring to the page numbers on which the financial statements are presented.
  13. 13. 4. management’s responsibility.- The act requires the directors of the company to present at the AGM financial statements that give a true and fair view of the financial position and performance of the company and such financial statements must also be prepared in accordance with approved accounting standard.- The auditor’s report should clearly state that the financial statements are responsibility of the company’s directors.5.auditor’s responsibility.- to form an independent opinion on the financial statements based on the audit.- This is to distinguish the auditor’s responsibility from that of the directors.
  14. 14. 6. Scope paragraph.- should make reference to established auditing standards andcommunicate to the members, in very general terms, what an auditentails.- conducted in accordance with Approved Standards on Auditing in Malaysia, which are ISAs adopted by MIA.- emphasis that these auditing standards require the auditor toobtain reasonable assurance that the financial statements contain nomaterial misstatement.- the scope paragraph also describes that an audit involved: Examination of evidence of a test basis. Assessing the accounting principles used in preparing the financial statements. Assessing the significant estimates made by management. Evaluation of the overall financial statements presentations.
  15. 15. 7. Opinion paragraph.- should contain a clear expression of opinion unless the auditor is unable to do so.- should contain an opinion stating whether the financial statements give a true and fair view in accordance with an applicable financial reporting framework.- should indicate clearly the financial reporting framework used to prepare the financial statements.- The use of the phrase ‘give a true and fair view’ is to conform to the requirement of the Act (section 174).- should also state whether the financial statements comply with the statutory requirements.
  16. 16. 8. Other reporting responsibilities- to expressing an opinion on the financial statements arise mainlyfrom statutory or regulatory requirement.- For example, the Act requires the auditor to express an opinion on the accounting and other record and registers of the company, in addition to an opinion on the true and fair view of the financial statements.9. Name and signature of auditor.- normally signed in the name of the audit firm and also the personal name of the audit partner responsible for the audit engagement.
  17. 17. 10. Date of report.- All audit reports should be dated.- dated as of the date on which the auditor has completed all significant auditing procedure.- The auditor’s report date indicates to the user the last day of the auditor’s responsibility for the review of significant events that have occurred after the date of the financial statements.- should not be earlier than the date financial statements are signed and approved by the directors and ready for issuance to the members of the company.11. Auditor’s address.- should name a specific location in the country or jurisdiction wherethe auditor practices.- This is normally the city where the auditor maintains the office that isresponsible for the audit.
  18. 18.  Page 592 (example unmodified report)- Title- Addressee- Management’s responsibility- Scope paragraph- Opinion paragraph- Name and signature of auditor- Address- Date of report
  19. 19.  obtaining reasonable assurance that the financial statements as a whole are free from material misstatement. to express an opinion on the financial statements based on the audit. state that the auditor believes that the audit evidence the auditor has obtained is sufficient and appropriate to provide a basis for the auditor’s opinion.
  20. 20.  An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. designed to assist the auditor in identifying material misstatement of the financial statements due to non compliance with laws and regulations.
  21. 21.  Limitation on Scopea. Imposed by the entity- the auditor would ordinarily not accept such a limited engagement as an audit engagement, unless required by statute.b. Imposed by circumstances- when the timing of the auditor’s appointment is such that the auditor is unable to observe the counting of physical inventories
  22. 22. a. The emphasis of matter paragraph- would ordinarily to highlight a material matter regarding a going concern problem.b. significant uncertainty- whose outcome depends on future actions or events not under the direct control of the entity but that may affect the financial statements.
  23. 23. c. amendment to other information- in a document containing audited financial statements is necessary and the entity refuses to make the amendment, the auditor would consider including in the auditor’s report an emphasis of matter paragraph describing the material inconsistency.

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