An audit report will follow a standard procedure or format, where you will be listing all relevant details starting from introduction, the name of the directors, auditors, their responsibilities, the form name, date, the base of the audit, and the final opinion or outcome. The report must be formal and concise where you will need to use proper accounting and economic terms.
Title and Introduction
The report must have a title or heading, which will refer to the company’s name and will incorporate the word independent which implies that the audit is conducted by an independent auditor (performed by a third party in order to avoid ambiguity or biasness). Here you will list the firm’s name, business address before moving on to the addressor’s name. This could be a sole owner or the board of directors.
Moving on to the introduction paragraph, this must contain a concise statement, enlisting the responsibilities of the concerned parties, i.e. the shareholders and the auditors. The former has an obligation to prepare financial statements which can be looked upon as references for the general public, while it is the latter’s duty to provide an opinion on those reports in accordance with the Generally Accepted Accounting Principals (GAAP).
Basis of Opinion
This is the scope paragraph where the auditor will first declare that the audit has been performed according to GAAP. The auditor will then concisely disclose all relevant financial statements and describe the basic procedure he or she has taken to examine all the reports. An essential element of this part of the audit report is that the auditor must be able to provide proof to the audience that the inspection has gone smoothly and that the opinion is verified and documented. Clear wordings and phrases must be used.
The auditor will state his or her opinion on the financial statements under review. The auditor’s opinion can fall into four basic categories – Unqualified opinion, qualified opinion, disclaimer opinion and adverse opinion.
It basically states that the auditor has given the opinion by applying a consistent procedure, which was used in the preceding year as well.