The Companies Act does not stipulate the form the auditor‘s report should take. The auditing standards seek to ensure that the auditor‘s report is clear and unambiguous. To this end, it seeks to standardize the form of the auditor‘s report. It does this by giving the basic elements of the auditor‘s report.
Appropriate report title
Auditing standards require that the report be titled and that the title includes the word ‘Independent’ e.g. ‘independent auditors report.’ The requirement that the title includes the word independent is intended to convey to users that the audit was unbiased in all aspects.
The report is usually addressed to the company, its stockholders or the board of directors. For practical reasons, it limits the users of auditor‘s report.
The first paragraph has three purposes, fist, it makes a statement that the practice did an audit. Secondly, it lists all the financial statements that were audited including the balance sheet dates and accounting periods for the income statement and cash flow statement. The wording of the financial statements in the report should be identical to those used by management on the financial statements. Thirdly, the introductory paragraph states that the statements are the responsibility of management and that the auditor‘s responsibility is to express an opinion on the statements based on the audit.
This paragraph is a factual statement about what the auditor did in the audit. This paragraph states how the audit was planned and performed in accordance with ISAs and states that the audit is designed to obtain reasonable assurance whether the financial statements and procurement records are free of material misstatements.
This final paragraph states the auditors conclusions based on the results of the audit. This part of the report is so important that often the audit report is simply called the auditor‘s opinion. The opinion paragraph is stated as an opinion rather than a statement of absolute fact or a guarantee.
Audit report date
The appropriate date for the report is the one on which the auditor has completed the most important audit procedures in the field. This date is important to users of financial statements as it indicates the last day of auditor‘s responsibility for review of significant events that have occurred after date of financial statements.
Name of audit firm
The firm‘s name is used because the entire firm has the legal responsibility to ensure that the quality of audit meets professional standards.