What is an audit report and what are the types? - Brittains Accountants & Advisors

An audit report could be either summarized or lengthy.



Following the completion of duty of an auditor within a company, it is only reasonable to give a report. This report is referred to as an audit report; one in which the auditor provides to express his opinion following auditing.

An audit report could be either summarized or lengthy. It may also be in a letter or a statement form. Irrespective of the structure, the auditor addresses the audit report to the shareholders of the company in question. As the shareholders of a company usually hire auditors, they are answerable to the shareholders of the company, and they must safeguard the interest of the shareholders.

A standard audit report should be made up of matters in Section 227 of Companies Act, 1956. While you may be wondering what is in Section 227 of Companies Act, 1956, we have solved the problem in the next section.

 

Contents of
Audit Report

In line with
Section 227 of Companies Act, 1956, the audit report should have the following:

·        If the company is keeping proper books
and records or not.

·        If financial explanations are being
received from the company staff or not.

·        If the balance sheet gives a fair and
true view or not.

·        If the profit and loss account gives a
fair and true view or not.

·        If statements from branch auditors
under Sec. 228 are being received properly or not (in a case where the company
has branches)

·        If financial statements are being
prepared in line with the requirements of companies act or not.

 

Types of Audit
Reports

There are two
types of audit reports—clean report (unconditional report) and qualified report
(conditional report). In a case where there are no forms of dis-satisfactory
points, an auditor simply issues a clean report. In a case where there are
dis-satisfactory points, the auditor gives a qualified report. 

Here are some
conditions that will make an auditor give a qualified report:

·       When the concepts of accounting are not
rightly followed

·       When the provision for bad and doubtful
debt is not sufficient

·       When the provision for case of
depreciation is not sufficient.

·       When the company does not act in line
with the provisions made by the companies’ act.

 

Sample of Clean
Report

 

To

The Share
holders,

XYZ Ltd.,

After having
audited the balance sheet of the above named company as on _________________
and Profit and Loss account of the same for the period ended _________________
and we hereby report the following:


1. The company
is keeping proper books.

2. We received
proper explanations from staff of the company.

3. Financial
statements are prepared in line with the requirements of the companies act.

4. Balance
sheet gives true and fair view.

5. Profit and
Loss account gives true and fair view.

 

Location:

Date:

(Signature)

Chartered
Accountant

 

Sample of
Qualified Report

 

To

The Share
holders,

XYZ Ltd.,

After having
audited the balance sheet of the above named company as on _________________
and Profit and Loss account of the same for the period ended _________________
and we hereby report the following:


1. The company
is keeping proper books.

2. We received
proper explanations from staff of the company.

3. Financial
statements are prepared in line with the requirements of the companies act.

4. Balance
sheet gives true and fair view.

5. Profit and
Loss account gives true and fair view. 

However, the
above stated report is subject to following conditions:

·        The provision for depreciation on the
factory equipment was insufficient.

·        Provision made for bad and doubtful
debts was not sufficient.

·        Stock was valued at market price which
was above the cost price.

·        The factory manager has received an
allowance from the company without the permission of the company’s Central
Government. 


Location:

Date:

(Signature)

Chartered
Accountant