• Appropriate title
An appropriate title such as the independent auditors report distinguishes the Auditors Report
from any other reports that may be annexed to the annual report and Financial Statements.
• The Auditor's report should be appropriately addressed
Usually the auditor's report is addressed to the members on whose behalf the audit is carried out.
For practical reasons, it also limits the users of the auditor's report.
• Introductory paragraph
This identifies the Financial Statements audited. Under the Companies Act, Financial Statements
or Accounts consist primarily of the Balance Sheet, Profit and Loss account and notes to the
account. International Accounting Standards on Cash Flow Statements requires auditors to
recognize the Cash Flows as part of the Financial Statements.
The auditor's report relates to the above statements only. However, the published Financial
Statements that are sent to the readers include other reports that may contain financial
information such as the Chairman's Statement. The Directors Report, the detailed Profit and Loss
account and other statistical information.
Although the auditor reviews these other statement or reports, he does not report on them. It must
therefore be clear in his report that he is not reporting on these other statements otherwise the
financial information contained therein could have an unmerited air of authenticity.
It is felt that most readers of auditor's reports and Financial Statements assume that the auditor
prepared the Financial Statements. It's necessary for the auditor to clarify that the preparation of
Financial Statements is the responsibility of directors.
• Paragraph on the scope of the audit
The reader requires assurance that the auditors procedures were authoritative and through. The
auditor therefore needs to state that they have audited in accordance with International Standards
of Auditing.
It is felt within the profession that readers expert auditors to detect and report on material errors
and frauds. It is not practicable within the constraints of auditing to detect all material
misstatements be they as a result of frauds or errors. And even though an audit shouldn't be
relied upon for the detection of errors and irregularities, the auditor must arrange his audit in
such a manner as to have reasonable assurance that the Financial Statements are free of material
misstatements. it is important to inform the reader that auditing is a limited exercise that cannot
guarantee 100% completeness and accuracy. That the auditor examines items a test basis not all
of them and that in valuing assets and liabilities there is subjectivity involved.
• Opinion paragraph
The report should clearly state the auditor's opinion as to whether the financial statements give a
true and fair view in accordance with the relevant financial reporting framework and whether
they comply with the companies Act requirements.
• Dating the audit report:
Clearly specifies the date the auditor committed himself to his opinion so that any subsequent
developments are considered in the light of that date.
• Auditor's address
• Signature in the name of the audit firm and location of the auditor i.e. office
Kavungya answered the question on May 15, 2019 at 08:52
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Date posted: May 15, 2019. Answers (1)
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