The auditor’ report is the final product of the audit work. It is usually very short but very important to the enterprise concerned. The auditors’ reports should not by any chance be under – estimated. Most auditors’ reports are short statement just expressing the opinion of the auditor the truth and fairness view of the accounts. The auditors’ report is supposed to show whether the financial statements comply with the necessary accounting standards and the necessary legislation and regulations.
The matters to be expressed in the auditors are expressly stated in the Seventh Schedule of the companies Act Cap 486 and also in the auditing guidelines. The sixth schedule is reproduced below:
SEVENTH SCHEDULE (s. 162)
Matters to be expressly Stated in Auditors’ Report
1. Whether they have obtained all the information and explanations which to the best of their knowledge and belief were necessary for the purposes of their audit
2. Whether, in their opinion, proper books of account have been kept by the company, so far as appears from their examination of those books, and proper returns adequate for the purposes of their audit have been received from branches not visited by them.
3. (1) Whether the company’s balance sheet and (unless it is framed as a consolidated profit and loss account) profit and loss account dealt with by the report are in agreement with the books of account and returns.
(2) Whether, in their opinion and to the best of their information and according to the explanations given them, the said accounts give the information required by this Act in the manner so required and give a true and fair view –
- in the case of the balance sheet, of the state of the company’s affairs as at the end of its financial year; and
- in the case of the profit and loss account, of the profit or loss for its financial year, or, as the case may be, give a true and fair view thereof subject to the non-disclosure of any matters (to be indicated in the report) which by virtue of Part III of the Sixth Schedule are not required to be disclosed.
4. In the case of a holding company submitting group accounts whether in their opinion, the group accounts have been properly prepared in accordance with the provisions of this Act so as to give a true and fair view of the state of affairs and profit or loss of the company and its subsidiaries dealt with thereby, so far as concerns members of the company, or, as the case may be, so as to give a true and fair view thereof subject to the nondisclosure of any matters (to be indicated in the report) which by virtue of Part III of the Sixth Schedule are not required to be disclosed.
The companies’ Act Cap 486 in the sixth schedule and section 147 requires that the auditor should state whether in his / her opinion the accounts:
- Give a true and fair view
- Complies with the Companies’ Act Cap 486 and other legislation
- Comply the auditing standards
- The auditor is required to state these matters expressly in his/her report
The auditing guidelines requires that the auditor must
Identify those to whom the report is addressed
Identify the financial states that the report relates
Refer specifically to whether the financial statements have audited in accordance with the approved Auditing Standards
- Refer specifically whether in his/ her opinion, the financial statements give a true and a fair view
- Refer specifically to any matters prescribed by relevant legislation.
In some instances the auditor is required to make further statements. The circumstances under consideration here includes
- If, in the auditors opinion, proper books of accounts and records have been maintained through – out the period under study
- If, in the auditors opinion, proper returns have not been received from branches he has not visited
- If the accounts are not in agreement with the accounting records and returns
- If the auditor has not received all the information and explanation which he deems necessary for the purpose of the audit
Note that these matters are only mentioned in the report only in the circumstances that they relate.
Content of the Auditors Reports
The Companies’ Act Cap 486 and the Auditing Guideline give the auditor some specific duty regarding the content of the auditors’ report. If certain information is not given in accounts and the financial statements, then this information need to be given in the report. Some of this information includes
- Particulars of directors’ emoluments including pensions etc
- Particulars of loans to the officers of the business
- Particulars of emoluments which the directors waived the right to receive
- Particulars of contracts in which the directors have interest
As you may noticed the information is only touching on the directors.
The auditors’ report has basically five sections as shown below
Section One – The Heading.
This section contains to whom the report is made. In starts with the words ‘Auditors Report to …..
Section Two – What the Auditors have done
This section contains the work the auditors have done and starts with the words “we have audited the financial statement on page … to page …
Section Three – The Opinion
This contains the opinion of the whether the books of accounts have maintained properly and whether the financial statements give a true and a fair view of the state of affairs of the business for the period under consideration. The section starts with the words “in our opinion the financial statements have been prepared under historical cost convention and give a true and fair view of the company’s state of affair for the year ended 31 December 2011
Section Four – the name of the auditor
The section contains the name of the that performed the audit work
Section Five – Date the Auditors’ Report was signed
This section has the date the report was duly signed
Types of Auditors’ Reports
There are two types of audit reports. These are:
- Unqualified Reports – these are clean reports whereby the auditor was satisfied that all the necessary information and clarifications were properly made. All the issues that the auditor may have raised were properly addressed and all the supporting documents provided
- Qualified Reports – these are reports whereby the auditor was not satisfied with the explanation clarification and other matters that he/she required from the officers