Contents of An Audit Report

Contents of an Audit Report
The basic structure of an audit report as prescribed by the Standards on

Auditing is as follows:
Heading Brief of contents
Title Title should mention that it is an ‘Independent Auditor’s Report’
Addressee Should mention clearly as to whom the report is being given to.
Members oMentions that it is the Management’s responsibility t
Financial Statements. f the company, Board of Directors
Management’s
Responsibility for Financial
Statements
Auditor’s Responsibility Mention that responsibility of the Auditor is to express an unbia

the financial statements and issue an audit report.
Opinion Should mention the overall impression obtained from the audit o
statements. For example Modified Opinion, Unmodified Opinion
Basis of the Opinion State the basis on which the opinion as reported has been achiev
basis should be mentioned.
Other Reporting If any other reporting responsibility exists, the same should be m
Responsibility example Report on Legal or Regulatory requirements
Signature of the Auditor The engagement partner (auditor) shall sign the audit report.
Place of Signature The city in which audit report is signed.
Date of Audit Report Date on which the audit report is signed.
Other headings being basic and self-explanatory in nature, we need to

understand the about the opinion part precisely. This part forms the basic
crux of an audit report.
Opinion in an Audit Report

There are primarily two kinds of opinions issued by an auditor in his / her
audit report:
 Unmodified Opinion (also called Unqualified report)
 Modified Opinion (also called Qualified report)
Unmodified Opinion
Issued for any audit where the auditor is satisfied that the financial
statements present a true and fair view of the operations and transactions
in an enterprise during the period. An audit report with an Unmodified
Opinion is also known as a ‘Clean Report’. An Unmodified report develops
confidence among users of Financial statements and annual reports of an
enterprise. It provides an impression that the financial statements are
reasonably free from any misstatements and results as appearing there are
true and fair.
Modified Opinion
Whenever the auditor has specific findings during his / her audit and
concludes that an Unmodified Opinion cannot be issued due to the nature
of findings, a Modified Opinion is issued in the audit report. There are two
basic reasons due to which an auditor concludes on issuing a Modified
Opinion:
 Based on the audit and evidence, finds out that the financial
statements contain a certain degree of material misstatements.
 Unable to obtain sufficient and appropriate evidences to conclude

that the financial statements are free from material misstatements.
There are three kinds of modified opinions which are issued according to
the findings and circumstances:
 Adverse Opinion
 Qualified Opinion
 Disclaimer of Opinion
Qualified Opinion
A Qualified Opinion is given in a situation where:
 The auditor concludes that misstatements are material but the

impact is not so high that it would render the whole financial
statements unacceptable; or
 The auditor is unable to obtain sufficient or appropriate audit

evidence but concludes that there are indications of misstatements in
the financial statements (but the degree is not high).
Example of a Qualified Opinion paragraph in audit report: In our

opinion, except for the incomplete disclosure of the information referred to
in the Basis for Qualified Opinion paragraph, the financial statements give
the information required by the Companies Act, 2013, in the manner so
required and give a true and fair view in conformity with the accounting
principles generally accepted in India:
 In case of the Balance Sheet, of the state of affairs of the company

as at March 31, XXXX;
 In case of Profit and Loss Account, of the profit/loss for the year
ended on that date; and
 In case of the Cash Flow Statement, of the cash flows for the year
ended on that date.
Adverse Opinion
An Adverse opinion shall be issued by the auditor where he concludes that

on the basis of evidence obtained and procedures performed, there are
material misstatements in the financial statements and the impact of the
same is high.
Example of a Qualified Opinion paragraph in audit report: In our
opinion, because of the omission of the information in the Basis for Adverse
Opinion paragraph, the financial statements do not give the information
required by the Companies Act, 2013, in the manner so required and also,
do not give a true and fair view in conformity with the accounting principles
generally accepted in India:
 In case of the Balance Sheet, of the state of affairs of the company

as at March 31, XXXX;
 In case of Profit and Loss Account, of the profit/loss for the year
ended on that date; and
 In case of the Cash Flow Statement, of the cash flows for the year
ended on that date.
Disclaimer of Opinion
A Disclaimer of Opinion is to be issued by an auditor in cases where the

auditor concludes that he / she is not able to obtain sufficient and
appropriate evidences. In such scenario, the auditor is not able to form an
opinion and thus, disclaims form providing an opinion on the financial
statements. The impact of material misstatements and degree of the same
is high enough.
Example of a Draft Disclaimer of Opinion: We were engaged to audit the

financial statements of ABC Private Limited (“the entity”) which comprises
the Balance Sheet as at March 31, XXXX, the statement of Profit and Loss,
(the statement of changes in equity) and statement of Cash Flows for the
year then ended, and notes to the financial statements, including a
summary of significant accounting policies. We do not express an opinion
on the accompanying financial statements of the entity. Because of the
significance of the matters described in the Basis for Disclaimer of Opinion
section of our report, we have not been able to obtain sufficient and
appropriate audit evidence to provide a basis for an audit opinion on these
financial statements.
Emphasis of Matter paragraph in

an Audit Report
In a situation where the auditor concludes that it is important to draw the
attention of users of the financial statement to a particular reported item,
he/she may include an Emphasis of Matter paragraph in his / her audit
report. In this case, the auditor is not required to modify his / her opinion.
The paragraph is added when the issue is not a key audit matter and only
requires disclosure for a better understanding of the financial statements.
Example of circumstances where the auditor shall include Emphasis

of Matter paragraph in audit report:
 To inform users of financial statements that the same has been

prepared under a special purpose framework;
 The auditor discovers some facts after the date of an audit report
and the auditor issues new or amended audit report.
 Uncertainty about the future outcome of an ongoing litigation.
Understanding Your Business, Informing

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Contents of An Audit Report

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Contents of An Audit Report

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Contents of an Audit Report

The basic structure of an audit report as prescribed by the Standards on

Heading Brief of contents

Title Title should mention that it is an ‘Independent Auditor’s Report’

Auditor’s Responsibility Mention that responsibility of the Auditor is to express an unbia

Place of Signature The city in which audit report is signed.

Date of Audit Report Date on which the audit report is signed.

Other headings being basic and self-explanatory in nature, we need to

Opinion in an Audit Report

 Unmodified Opinion (also called Unqualified report)

 Modified Opinion (also called Qualified report)

 Unable to obtain sufficient and appropriate evidences to conclude

 The auditor concludes that misstatements are material but the

 The auditor is unable to obtain sufficient or appropriate audit

Example of a Qualified Opinion paragraph in audit report: In our

 In case of the Balance Sheet, of the state of affairs of the company

An Adverse opinion shall be issued by the auditor where he concludes that

 In case of the Balance Sheet, of the state of affairs of the company

A Disclaimer of Opinion is to be issued by an auditor in cases where the

Example of a Draft Disclaimer of Opinion: We were engaged to audit the

Emphasis of Matter paragraph in

Example of circumstances where the auditor shall include Emphasis

 To inform users of financial statements that the same has been

 Uncertainty about the future outcome of an ongoing litigation.

Understanding Your Business, Informing

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