AUDIT REPORT

AUDIT REPORT
While conducting every audit auditor has to go through three phases(a) Preliminary work for audit. (b) Conduct of actual audit, and (c) Conclusion of audit , which means submission of Audit Report.

Defination
LanCester A Report is a statement of collected & 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.

 J.B.Ray-The Report shall either contain as expression of opinion regarding the financial statements, taken as a whole or an assertion to the effect that an opinion cannot be expressed when an overall opinion cannot be expressed, the reason therefore should be stated. In all cases, where auditors name is associated with financial statements the report should contain a clear cut indication of the character of the auditors examination, if any, and the degree of responsibility he is taking.

 In short, the Audit Report is nothing but a statements of observation gathered & considered while proving conclusive evidence of company's financial position. It is a medium through which an auditors expresses his opinion on the financial statement under audit. It is an important part of the audit as it provides the results of the audit conducted by the auditor.

Importance of Audit Report

1. An Audit report is the end product of the auditing and is very important & concluding part of the audit process. 2. Audit report gives the auditors opinion on the accounts & record of the company, as examined by him. 3. Audit Report reflects the work done by the auditor.

4. Audit report is the instrument which, measures the auditors responsibility in regard to the true & fairness of the financial statement of the company. 5. Audit Report indicates the real position of the financial status of the company & which is used by different people as a reliable document.

Contents of Audit Report

The Audit report generally shows the nature and scope of audit conducted by the auditor and his opinion on the final accounts of the company. Companies Act, 1956 and International Auditing Guideline has laid down certain guidelines relating to the contents of auditing reports as under , 1. Title - The report has certain title like Audit Report to enable the readers to identify the report & distinguish it from reports issued by others.

2. Address : The audit report should appropriately addressed e.g. in case of company audit, it should be addressed to the shareholders. 3. Identification of financial statement: the financial statement can be identified by including the name of the entity and the date and the period covered by the financial statement. 4. Auditing Standards : In the audit report the auditor should make a reference to the Standard on Auditing (SA) to ensure that he has carried out the audit in accordance with the established standards.

5. Opinion: The Audit Report should clearly set forth the auditors opinion on the companys financial position and operational results like, the Financial Statements give true & fair view of the state of affairs. The opinion may be either i) Unqualified ii) Qualified

(i) Unqualified : When an auditor gives an opinion without any reservation, it is an unqualified opinion. (ii) Qualified: When an auditor gives an opinion with certain reservation, it is said that he has given a qualified opinion.

6.Signature of the Audit Report: section 229 of the lays down that only the person appointed as the auditor of the company.[The audit report is required to be signed in the name of the firm of auditors or the personal name of the auditor or both as appropriate, in keeping with terms of appointment (whether on Individual or a firm)]

7. Auditors Address: The report should contain the auditors postal office address. 8. Date of the Report : The auditor report should carry the date of the report.

Types of Audit Report

An Audit Report may be : 1) A Clean or clear or Unqualified Report. 2) A Qualified Report

Clean or Clear or unqualified Audit Report

When auditor doesnt insert any reservation or qualification in his audit report then it is called a clean or unqualified audit report. As provided u/s 227 (2) of the Companies Act 1956, certain questions which the auditor of the company must inquire and report on specified issues in his audit report. When these questions are answered positively without qualification and also, the Balance Sheet and Profit & Loss Account exhibits true and fair view of the state of affairs of the company, the auditors gives a clean or unqualified report.

Qualified Audit Report

When auditor gives his report with certain reservations, then the report is called a qualified audit report. In following circumstances the auditor has to qualify his report. (a) He cannot conduct audit satisfactorily due to non availability of certain books of accounts or records, information or explanations necessary for conduct of his audit.

(b) He finds that the Balance Sheet and Profit & loss Account have not been prepared in accordance with accepted accounting principles. (c) He detects that provisions for Bad & Doubtful Debts, Depreciation etc. are not adequate. (d) He detects that the company has created certain secret reserve.

(e) The stock in trade has been valued at market price which is more than cost price. (f) He finds that the contingent liability for bills discounted has not been disclosed. (g) If in his opinion provision for taxation made is not proper.

(h) When he finds any embezzlements of cash or misappropriation of goods or manipulation of accounts which considerably affects the financial position of the company.