FRA Auditors' Report

University School of Business

DEPARTMENT - MBA
Master of Business Administration
Auditors’ Report
By: Dr Charu Saxena
(Assistant Professor)

FINANCIAL REPORTING &

ANALYSIS DISCOVER . LEARN . EMPOWER
Audit Report
An auditor's report provides an opinion of the validity and reliability
of a company or organization’s financial statements.
The goal of an auditor's report is ultimately to document reasonable
assurance that a company’s financial statements are free from
material error.
Audit Report is an opinion on the financial statements of the
company after conducting financial audit of the company.
Audit report is used by :
Investors
Analysts
Company Management
Money Lenders 2
Statutory Reporting
• Statutory reporting is the mandatory submission of financial and
non- financial information to a government agency.
• Each industry has its own set of laws and regulations that mandate
reports.
Purpose of a statutory Audit
To determine whether an organization is providing a fair and accurate
representation of its financial position by examining information such
as bank balances , book-keeping record and financial transaction
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What Is Statutory Audit In India
• By the meaning of word statutory audit in India is the audit which is
prescribed by status/Legislation
• In India mainly statutory audit means audit under Companies Act in
which auditor reports to the member of the company i.e.
shareholders.
• Conduction of Audit as per IGAAP (Indian Generally Accepted
Accounting Principles), Companies Act, ICAI, IFRS Accounting
Standards and Auditing Standards
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Contents of a Statutory Audit Report
Title of the Report
Addressee
Opening or Introductory Paragraph
Scope of the Audit
Opinion of the Auditor
Signature
Place of Signature
Date of the Report
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1.TITLE
The title of the report mentions it is ‘Independent Auditors’ report.
2.ADDRESSEE
Addressee is the person/group of persons to whom the report is
addressed to.
• In the case of the Statutory Audit Report, the addressee is the
shareholders of the Company.
• Also, addressee refers to the person appointing the auditors.
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3.INTRODUCTORY PARAGRAPH
This paragraph gives the responsibility of the auditor and the
management of the Company.
It defines that the responsibility of the auditor is to perform an
unbiased audit of financial statements and give their unbiased opinion.
4.SCOPE OF THE AUDIT

This paragraph describes the scope of the audit conducted by the
Auditor by specifically mentioning that the audit was conducted as per
the generally accepted auditing standards in the country.
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5.OPINION OF THE AUDITOR
The Auditors give their opinion on the financial reporting by the company. There are four different types of
opinions:
 Unqualified Opinion - is an independent auditor's judgment that a company's

financial statements are fairly and appropriately presented, without any
identified exceptions, and in compliance with generally accepted accounting
principles (GAAP).
 Qualified Opinion - is an auditor's opinion that the financials are fairly
presented, with the exception of a specified area.
 Adverse Opinion - is a professional opinion made by an auditor indicating that a
company's financial statements are misrepresented, misstated.
 Disclaimer of the Opinion - is a statement made by an auditor that
no opinion is being given regarding the financial statements of a client.
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6.SIGNATURE
The auditor must sign the audit report content at the end.
7. PLACE OF SIGNATURE
This gives the city in which the audit report was signed.
8.DATE OF THE AUDIT REPORT

Date on which the audit report is signed.
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Auditor’s Responsibilities for the audit of
financial statements
• To Identify and assesses the risks of material misstatement of the
entity’s financial statements
• To obtains an understanding of internal control relevant to the audit
in order to design audit procedures
• To evaluates the appropriateness of: Accounting policies, the
accounting estimates and related disclosures made by the directors.
• To conclude on the appropriateness of the directors’ use of the going
concern basis of accounting
• To evaluate the overall presentation, structure and content of the
financial statements
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• Identifies and assesses the risks of material misstatement of the
entity’s financial statements,
• whether due to fraud or error,
• obtains audit evidence that is sufficient and appropriate to provide a
basis for the auditor’s opinion.
The risk of not detecting a material misstatement resulting from fraud
is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
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• Obtains an understanding of internal control relevant to the audit in
order to design audit procedures that are appropriate in the
circumstances.
• To Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made
by the directors.
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• To concludes on the appropriateness of the report:
• The auditor’s conclusions are based on the audit evidence obtained
up to the date of the auditor’s report.
• However, future events or conditions may cause the entity (or where
relevant, the group) to cease to continue as a going concern. If the
auditor concludes that a material uncertainty exists, the auditor is
required to draw attention in the auditor’s report to the related
disclosures in the financial statements or, if such disclosures are
inadequate, to modify the auditor’s opinion.
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• Evaluates the overall presentation, structure and content of the
financial statements, including the disclosures, and whether the
financial statements represent the underlying transactions and events
in a manner that achieves fair presentation (i.e. gives a true and fair
view).
• To obtains sufficient appropriate audit evidence regarding the
financial information of the entities or business activities within the
group to express an opinion on the consolidated financial statements.
• The group auditor is responsible for the direction, supervision and
performance of the group audit.
The group auditor remains solely responsible for the audit opinion.
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Importance of Audit Report:
• Provide assurance on Financial Statements. As issued by a
professional and independence auditor which is independent from
management, assure that financial information is correct or not.
• Prove management integrity on their shareholders. As auditor is
independent from management, the report could prove whether
managements are honest to their shareholders or not.
• It is the requirement of law and regulation. The auditor is the
evidence that could prove to the government that the entity is
complying with the law.
• It is the requirement of shareholders. Most of the corporate
shareholders want their entity’s financial statements to be audited.
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• Understandable to the shareholders. This report is examined by the
experts and express into the easy words that could be understood by
most of the shareholders who do not have financial or audit
background.
• Parent company’s requirement. Many parent companies that have
subsidiaries operating in other countries or even in the same country
normally required their subsidiaries’ financial statements to be
audited.
• Help stakeholders to understand about entity’s financial and
operational situation. This includes financial and non-financial
problems that could lead the entity to face bankruptcy in the next
foreseeable period from the audit report date.
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University School of Business

FINANCIAL REPORTING &

4.SCOPE OF THE AUDIT

 Unqualified Opinion - is an independent auditor's judgment that a company's

8.DATE OF THE AUDIT REPORT

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