The audited financial statements include different kinds of important elements without which it will not be considered as completed audit report. Corporations for example, publicly traded companies must do annual audit as per the securities and exchange commission and other regulatory authority. Audited financial statements also need when a company will to raise fund from the general investors in the form of IPO. The auditor’s report includes the following basic elements, ordinarily in the following listed format.
- Title of the Report: The auditor’s report should have an appropriate title. It may be appropriate to use the term “Independent Auditor’s Report” to distinguish this report from others report that may not have the same requirement of an independent auditor.
- Addressing: The auditor’s report should be appropriately addressed as required by the circumstances of the engagement and local regulations. The report is generally addressed either to the shareholders or to the board of directors of the audited entity.
- Opening or Introductory Paragraph: The auditor’s report should identify the financial statements of the entity that have been audited, including the data and period covered by the financial statements. The report should also include a statement that the financial statements are the responsibility is only to express an opinion based on the audit.
- Scope Paragraph: The auditor’s report should describe the scope of the audit by stating that the audit was conducted in accordance with international standards on auditing and other relevant national standards as appropriate. The report should also include a statement that the audit was planned and perform to obtain a reasonable assurance about whether the financial statements are free from material misstatements. The auditor’s report should describe the audit as follows.
- Examining evidence on a test basis.
- Assessing accounting principles used in financial statements.
- Assessing significant estimates made by the management in preparing financial statements.
- Evaluating the overall financial statements presentations.
After accumulating the above, the report should also include a statement by the auditor that the audit provides a reasonable basis for the opinion.
Opinion Paragraph: The opinion paragraph of the auditor’s report should clearly indicate the financial reporting framework used to prepare the financial statements and state the auditor’s opinion as to whether the financial statements give a true and fair view in accordance with the financial reporting framework and whether the financial statements comply with statutory requirements.
Date of the Report: The auditor should specify the date of the report as of the completion date of the audit. Since it is the responsibility of the auditor to audit the information provides by the management, the date of the audit report should not be earlier than the date on which the financial statements are signed by the management.
Address of Auditors: The audit report should mention a specific location of the auditor’s office.
Signature of the Auditors: The audited financial report should be signed in the name of the audit firm, the personal name of the auditor and both.