About auditing

Using this video 'Audit Report' as a brief introduction, audit reports are assessments of the validity and reliability of an institute's financial statements, based on the auditor's opinion.

There are four types of audit reports:

• Unqualified Opinion
  'An unqualified opinion is an independent auditor's judgment that a company's financial records and statements are fairly and appropriately presented, and in accordance with Generally Accepted Accounting Principles (GAAP). An unqualified opinion is the most common type of auditor's report.'

• Qualified Opinion
  In situations when a company’s financial records have not been maintained in accordance with GAAP but no misrepresentations are identified, an auditor will issue a qualified opinion. The writing of a qualified opinion is extremely similar to that of an unqualified opinion. A qualified opinion, however, will include an additional paragraph that highlights the reason why the audit report is not unqualified.
• Adverse Opinion
  The worst type of financial report that can be issued to a business is an adverse opinion. This indicates that the firm’s financial records do not conform to GAAP. In addition, the financial records provided by the business have been grossly misrepresented. Although this may occur by error, it is often an indication of fraud. When this type of report is issued, a company must correct its financial statement and have it re-audited, as investors, lenders and other requesting parties will generally not accept it.
• Disclaimer of Opinion
  On some occasions, an auditor is unable to complete an accurate audit report. This may occur for a variety of reasons, such as an absence of appropriate financial records. When this happens, the auditor issues a disclaimer of opinion, stating that an opinion of the firm’s financial status could not be determined.
  The 4 general reasons for a disclaimer of opinion are:
  1) Lack of independence or a conflict of interest between the auditor and auditee
  2) Significant scope limitations, whether intentional or not, that hinder auditor's work in obtaining evidence and performing procedures
  3) Substantial doubt about auditee's ability to continue operating
  4) Significant concerns with/within the auditee

Components of a typical 'unqualified' audit report would include:

1. Report Title
2. Address of auditor/auditor's firm
3. Introductory Paragraph
4. Scope Paragraph
5. Opinion Paragraph
6. Name & Signature of Auditor
7. Date of Report

The 'Introductory Paragraph', 'Scope Paragraph', and 'Opinion Paragraph' are the bulk of the content, and reflect the quality of an auditor.

Introductory Paragraph should state:

• list of financial statements covered by report 
• statements are the responsibility of the management
• auditor has responsibility to express an opinion

Scope Paragraph should state:

• content of audit
• audit provides only reasonable assurance that financial statements contain no material mistatements
• audit involves examination of evidence on a text basis

Opinion Paragraph should state




The conditions required to issue a standard unqualified audit report are:

1. All financial statements are included 
2. The three general standards have been adhered to in all respects on the engagement 
3. Sufficient evidence has been gathered and presented to conclude that the three standards of field work have been met
4. Financial statements presented are in accordance with generally accepted accounting principles (GAAP)
5. There are no circumstances requiring the addition of an explanatory paragraph or modification of the wording of the report 

How do I start? 6 Step Audit Process

Online sample template:
Sample Template

Online sample reports:
Sample Report 1
Sample Report 2