Basic elements of the unqualified audit report.
Describe clearly the circumstances in which an adverse opinion and a disclaimer of opinion would be appropriate and give two examples, one each, to illustrate your answer. (A full audit opinion is not required).
Audit reports should be addressed to the members of the company on whose behalf the audit is undertaken.
2. Introductory paragraph
It identifies the financial statements audited to distinguish such information from other documents that have not been subject to audit e.g. chairman‘s report.
This paragraph also refers to the accounting convention under which the financial statements have been prepared.
3. Statement of responsibility of directors and auditors. This states that it is the responsibility of the directors to prepare financial statements that show a true and fair view.
4. Basis of opinion (scope paragraph)
Audit carried out in accordance with IAS, ISA and Company‘s Act requirement and other statutory requirements.
5. A statement that the audit was planned and performed to obtain reasonable assurance that financial statements are free from material misstatements.
6. It should describe an audit as including:
a. Examining on a test basis evidence to support the financial statement amounts and disclosures.
b. Assessing the accounting policies used in preparing the financial statements
c. Assessing the significant estimates made by directors in preparation of financial statements.
d. Evaluating the overall financial statement presentation.
7. It should clearly state the auditor‘s opinion as to whether the financial statements give a true and fair view in accordance with financial reporting framework and their compliance with statutory requirements. In particular whether the balance sheet and the profit and loss account show a true and fair view of the state of the financial position of the company and its financial performance.
8. It should date the report as of audit completion date i.e. when the auditor receives all evidence required to support his opinion.
9. It should be signed in the audit firm‘s name and should name the audit firm office.