A very crucial and important element of an audit is “Audit Report“. The report is the medium of communication of the auditor’s expert views on the financial statements and it has a significant bearing on the credibility of such statements. It is necessary to emphasise that an auditor’s report is directly linked with the task entrusted to him. In different circumstances the terms of his appointment will be different so the Audit procedure should be conducted in the basis of that scope and report his observations and opinion in “Audit Report”.
Elements of an Audit Report
As per SA 700 “Forming an opinion and reporting on Financial Statements“, the auditor’s report includes the basic elements ordinarily, in the following layout:
1. Title : The auditor’s report shall have a title that clearly indicates that it is the report of an independent auditor.
2. Addressee: The auditor’s report shall be addressed as required by the circumstances of the engagement.
3. Introductory Paragraph: The introductory paragraph in the auditor’s report shall:
- Identify the entity whose financial statements have been audited;
- State that the financial statements have been audited;
- Identify the title of each statement that comprises the financial statements
4. Management’s Responsibility for the Financial Statements
5. Auditor’s Responsibility
6. Auditor’s Opinion
7. Other Reporting Responsibilities
8. Signature of the Auditor
9. Date of the Auditor’s Report
10. Place of Signature
Techniques of Drafting a Audit Report
In a common paralance, an audit report is the formal opinion of audit findings. The report writing is the end result of an audit performed by an auditor. This report can be used by the person or company that was audited as a tool for financial reporting and investing or to learn where they need to make changes in the company. After you have conducted an audit, here are some tips to help you when you want to know how to write an audit report.
1. Think about the Reader of the report :
O ne should adjust his report writing style according to the recipient. One should understand your content and your views clearly. By expressing views in the report, the auditor takes upon himself a great responsibility because a large number of people are likely to put reliance on the financial statements. It should be written in simple language, and all acronyms and abbreviations should be explained. The recipient of the audit may need to refer back to it in the future and you want to make sure that they can still understand it when they return to it.
2. Designed as a Professional does :
Having a presentable report will make people want to read it. Use fonts that are easy to read, but be consistent. Do not use too many different fonts in your report. Using some color is fine but do not use too much at the risk of looking unprofessional.
3. Brief Summary:
This summary should be clear and straight to the point. It should state what is in the full audit report, allowing the reader to decide whether or not they need to read the entire report.
4. State your aims and objectives for the audit :
It should explain why you are doing the audit. If the audit was to address a certain problem or concern, it should be stated after the summary. You can also list your methodology. Tell your reader who your chosen target was for the audit and how you collected the information. You can also mention how you analyzed the data
5. Analyze the results :
It is best to show figures as numbers and percentages when applicable. You can analyze your findings in more than 1 way. If you are auditing a business, you can give the results based on department, number of employees or position.
6. Give complete details of your findings from the audit :
The way in which you display your findings may vary depending on the type of audit and the information. For example, a quality audit report may state observations and reference corresponding clauses in a manual that should be complied with. If your audit findings are more statistical, you can add pie charts and graphs into your report. Pie charts are used to show percentages or portions of a whole. Bar graphs are useful in comparing results for different groups.
7. Finish your report with a conclusion :
List the key points you obtained from your audit results. Do not make the conclusion too long and make sure that it is supported by your data.
Types of Audit Report
There might be different different forms and techniques for drafting an audit report and even as per Institute of Chartered Accountants of India, 1949 has prescribed a format for drafting the audit report.
There might be different audit report requirement, as per the applicability or as per the opinion of the auditor, so they can be drafted in the below mentioned ways:
2. Auditor Report with branch with CARO cash flow not applicble
3. Auditor Report with branch auditor with cash flow & CARO
4. Auditor Report with branch Small co.
5. Auditor Report with Caro without cash flow
6. Auditor Report with Cash Flow , without CARO
7. Auditor Report with cash flow and Caro
8.Branch Consolidated Audit Report
9. Holding and subsidary Consolidated auditor report
10. Qualified Small Company Report
I hope this post will help you to frame a good Audit Report which will be clear, to the point and the opinion should be unbiased.
Happy Reading !!!!
1. Study Material : Institute of Chartered Accountant of India (CA-Final)
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