Which Audit Report You Require for your Business?
Tanvi Fal Dessai
Have you ever wondered why you need an Audit report or why your investor or the Bank asks you for an Audit report?
Doesn’t this thought of why the Stakeholder is easy with an Internal Audit Report While your Bank will insist on getting an External Audit Report puts you in a conflict?
Now, first and foremost, What Is an Audit Report?
An Audit report is produced by the auditor covering your assets and liabilities to demonstrate your present and potential financial status. It includes all of the financial facets of a business—the audit report for your financial statements shall usually be done after a span of 12 months.
As we know that the audit reports are used by various individuals who are having an interest in the organization as it includes:
- Investors – to define the financial status of the organization for investment purposes.
- Shareholders & Board of Directors – to access the disclosure of financial records and the integrity of management.
- Bank – to know the liquidity situation of the firm and if the company has the potential to repay the loan (In case the loan is taken from a bank)
- Government – to verify the completeness and consistency of the tax.
Now, talking about the internal Audit for a company, it is an exercise to review companies’ strength of internal control, compliance to the company policies, review and improve company processes, and identify risky areas. Alongside it is an overside for fraud and error.
But when one has to do an External Audit report, the auditors are required to prepare an Audit comprising of either components, each portraying different meanings & messages related to each report.
The Four main components are:
1.Unqualified Audit Report
The auditor issues an unqualified audit report as, in his view, the financial statements are free from material misstatement. This report demonstrates that the financial statements compiled and submitted by the company are accurate, fair, and in compliance with accounting standards, laws, and regulations.
2. Qualified Audit Report
The auditor issued a qualified audit report as although he doesn’t find any material misstatements in the financial statements. However, certain matters are not compliant with Generally Accepted Accounting Principles (GAAP). A qualified audit report contains an extra paragraph to clarify that the audit report is not unqualified.
3. Adverse Audit Report
The auditors issue an adverse report if the company’s financial statements do not give an accurate and fair view of the company’s financial position and performance.
4. Disclaimer of Opinion
Suppose the auditor finds a significant chance of fraud or cannot establish or obtain evidence of the size of errors, which may be materially significant. In that case, he disclaims from giving an opinion on the accounts.
So, now you have to decode which Audit Report you require for your company.
An Audit Report benefits you in the following:
- It tells you the exact financial status of your company.
- Audit results tend to show executive honesty to their shareholders – whether or not the company is trustworthy and truthful to its shareholders.
- Most parent corporations of branches in the same or other countries want to inspect their subsidiaries’ financial statements. It also helps to operate the subsidiary more efficiently.
- The auditor’s report aims to recognize the financial and non-financial challenges of a company that will save the company from facing debt difficulties in the future.
- It is a significant legal obligation that the records be audited and provided. The government and the auditor have the details on the yearly turnover, the valuation of cash, the number of staff, etc. It is like proof that can prove to the government that the individual in question acts appropriately and in compliance with the law.
- It is the requirement of shareholders. That is the responsibility of shareholders. They want the financial statements of the organization to be audited. The same report is then analysed and expressed by the specialists in such a manner that it can be interpreted by most shareholders who do not have deep experience in finance or auditing.
AM Audit Prepares your Audit Reports
With a team of trained professionals having extensive insights into various business systems, environments, and processes, we are the best. We understand that companies need the finest of systems, platforms, and infrastructure to successfully run their businesses. Therefore, we adopt a highly value-adding, risk-based auditing approach to improve their operational efficiency. For auditing services in Dubai.