The document outlines the key elements that must be included in an auditor's report according to the Companies Ordinance 1984. It discusses the required sections of the report including the title, addressee, opening paragraph, scope paragraph, opinion paragraph, date of report, auditor's address and signature. It also describes the types of opinions that can be issued - unqualified, qualified, disclaimer of opinion, and adverse opinion - and the circumstances under which each would be appropriate.

1. AUDITOR’S
REPORT
BY
Atta-ur-Rahman Arif

2. INTRODUCTION
• Section 233(3) requires that the financial
statement of a company shall be audited
by the auditor and the Auditor’s Report
shall be attached thereto.
• The auditor of a company is required to
make a report to the members of the
company on the accounts examined by
him under section 255(3) of Companies
Ordinance 1984.

3. • Under section 233(4), every company is
required to send a copy of the audited
Financial Statement together with the
Auditor’s and Director’s report to every
member at his registered address, at least 21
days before the meeting at which these are
to be presented.
• Secton 242 requires every Public Company to
file with the Registrar five copies of financial
statement together with the auditor report.
INTRODUCTION

4. BASIC ELEMENTS
• The Auditor’s Report includes the
following basic elements:
1. Title
2. Addressee
3. Opening or Introductory Paragraph
4. Scope Paragraph
5. Opinion Paragraph

5. 6) Date of Report
7) Auditor’s Address
8) Auditor’s Signature
BASIC ELEMENTS

6. 1. TITLE
• The auditor’s report shall have an
appropriate Title.
• It may be appropriate to use the
term “Independent Auditor” in the
title to distinguish the Auditor’s
Report from the reports that might
be issued by others, such as by
Board of Directors, Internal Auditor.

7. 2. ADDRESSEE
• The auditor’s report should be
appropriately addressed as required by
the circumstances of the engagement
and local regulations.
• The report is ordinarily addressed either
to the shareholders or the board of
directors of the entity whose financial
statement are being audited.

8. 3. OPENING PARAGRAPH
• The auditor’s report should identify the
financial statement of the entity that have
been audited, including the date of the
period covered by the financial statement.
• The report should include a statement that
the financial statements are the
responsibility of the entity’s management
and a statement that the responsibility of the
auditor is to express an opinion on the
financial statement based on audit.

9. 4. SCOPE PARAGRAPH
• Scope refers to the auditor’s ability to
perform the audit procedures deemed
necessary in the circumstances.
• The auditor’s report should describe the
scope of the audit by stating that the
audit was conducted in accordance with
the ISAs or in accordance with the
relevant National Standards or Practices
as appropriate.

10. • The auditor’s report should include a
statement that the audit was planned
and performed to obtain reasonable
assurance about whether the financial
statement are free of material
misstatement.
• The report should include a statement
by the auditor that the audit provides a
reasonable basis for the opinion.
4. SCOPE PARAGRAPH

11. 5. OPINION PARAGRAPH
• The auditor’s report should be clearly
state the auditor’s opinion as to
whether the financial statement give a
true and fair view (or are presented
fairly, in all material respects) in
accordance with the financial reporting
framework and, where appropriate,
whether the financial statement comply
with statutory requirements.

12. • Both terms indicate, amongst other
things, that the auditor considers only
material matters.
• The financial reporting framework is
determined by ISAs, rules issued by
Professional Bodies and the
development of general practice within
a country.
5. OPINION PARAGRAPH

13. 6. DATE OF REPORT
• The auditor should date the report as of
the completion date of the audit.
• Since the auditor’s responsibility is to
report on the financial statement as
prepared and presented by
management, the auditor should not
date the report earlier than the date on
which the financial statements are
signed or approved by the management.

14. 7. AUDITOR’S ADDRESS
• The report should name a
specific location, which is
ordinarily the city where the
auditor maintains the office that
has responsibility for the audit.

15. 8. AUDITOR’S SIGNATURE
• The report should be signed in
the name of the audit firm, the
personal name of the auditor or
both, as appropriate.

16. TYPES OF REPORT
• The auditor of a company is required to
make a report to the members of the
company on the accounts examined by
him in the following two types:
1. Unqualified Report
2. Modified or Qualified Report

17. UNQUALIFIED REPORT
• Unqualified report/opinion should be
expressed when the auditor concludes that
the financial statements give a true and fair
view in accordance with the Identified
Financial Reporting Framework.
• It also indicates that any changes in
accounting principles or in the method of
their application, and the effects thereof,
have been properly determined and
disclosed in the financial statement.

18. • The auditor’s report is considered to be
modified/qualified in the following
situations:
– Matters That Do Not Affect the Auditor’s Opinion
• Emphasis of Matter
– Matters That Do Affect the Auditor’s Opinion
• Qualified Opinion
• Disclaimer of Opinion
• Adverse Opinion
MODIFIED REPORT

19. MATTERS DO NOT AFFECT
• An auditor’s report may be modified by
adding an emphasis of matter paragraph to
highlight a matter affecting the financial
statements which is included in a note to the
financial statement that more extensively
discusses the matter.
• The addition of such an emphasis of matter
paragraph does not affect the auditor’s
opinion.

20. • The paragraph would preferably be
included after the opinion paragraph and
would ordinarily refer to the fact that the
auditor’s opinion is not qualified in this
respect.
• The auditor should modify the report by
adding a paragraph to highlight a material
matter regarding a Going Concern
problem.
MATTERS DO NOT AFFECT

21. • An auditor may not be able to express an
unqualified opinion with either of the
following circumstances exist:
a) There is a limitation on the scope of the
auditor’s work ; or
b) There is a disagreement with the
management regarding the acceptability of
the accounting policies selected, the
method of their application or the adequacy
of financial statement disclosures.
MATTERS DO AFFECT

22. c) Where he has been refused an access to any
book, accounts and vouchers of the company.
d) Where he has been unable to obtain any
information or explanation that he may have
required from the directors and officers of the
company.
e) Where Balance Sheet does not exhibit a true
and fair view of the state of the company's
affair.
f) Where proper books of account, as required by
Law, have not been kept by the company for
the period covered by the audited accounts.
MATTERS DO AFFECT

23. Qualified Opinion
When the auditor concludes that an
unqualified opinion can not be expressed
but the effect of any disagreement with
management or limitation on scope is not so
material and pervasive as to require an
adverse opinion or a disclaimer of opinion.
A qualified opinion should be expressed as
being “except for” the effects of the matter
to which the qualification relates.
MATTERS DO AFFECT

24. Disclaimer of Opinion
When the possible effect of a
limitation on scope is so material
and pervasive that the auditor has
not been able to obtain sufficient
appropriate audit evidence and
accordingly is unable to express an
opinion on the financial statement.
MATTERS DO AFFECT

25. Adverse Opinion
An adverse opinion should be expressed
when the effect of disagreement is so
material and pervasive to the financial
statements that the auditor concludes that a
qualification of the report is not adequate to
disclose the misleading or incomplete nature
of the financial statement.
Auditor states that, in his opinion the
financial statement do not give a true and fair
view.
MATTERS DO AFFECT