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An audit report is prepared by professional to provide transparency in accounts helping shareholders and regulators get a fair impression of a company’s financial dealings. This article explores the contents of a company’s audit report and the various types of audit reports.
Audit of the accounts of a company is a mandatory process of verification of the book of accounts by an independent Chartered Accountant.
Auditing of the accounts of a company gives the regulators and shareholders of the company a fair impression of the existing financial affairs of the concerned company.
As per the Companies Act, it is mandatory for private limited, one person and limited companies to appoint a professional auditor and conduct an audit of the accounts of the company annually.
Here is a brief on what the audit report is all about after the completion of an audit of a company.
Also Read: Appointment of Auditor of a Company
Company’s Audit
After the audit of a company is done, the professional auditor generates an audit report which consists of the following:
The first and foremost thing that an auditor’s report reflects is whether the balance sheet reflecting the profit and loss of a company is true and whether it is reflecting the right state of affairs of the company.
It also determines whether the accounts book maintained is as per the desired law as per Companies Act.
Whether the accounts which is being prepared by the company is as per the standards of accounting issued by ICAI.
The report also determines whether the company has the adequate measures and internal controls in order to safeguard the inventory and fixed assets.
The report reveals whether the concerned company has adequate internal control and sufficient measures which is commensurate with the size of the company.
The audit report also reflects whether the company has defaulted any financial institution or bank for paying off loans.
The report also reveals whether the company has made all the payments on time without any default or any statutory dues.
The audit report also determines whether the loans obtained by the company have been spent for the designated purposes.
The report also mentions whether the related party transactions if any is done with any prejudice or not.
The audit report also reports instances of any kind of fraud done by the concerned company.
Related: Who can be appointed as statutory auditor to a company
Audit Report Types
After conducting an audit for a company, the auditor is supposed to prepare an audit report or audit opinion. The audit opinion is a crucial part of the audit report and there are four major types of audit opinion as per the accounting standards. They are as follows: