Auditors report第三课1

International Financial Statement Analysis The importance of the

auditor’s report

Audit report

Audit is defined as“an independent review and expression of opinion on the financial statement of an enterprise”.

The purpose of the conduct of an audit is to provide an independent verification that the financial statement is prepared in accordance with the legislative and regulatory requirements,that the information is presented in a true and fair manner and it complies with the accounting standards.

The role of Auditing

Financial statements provide a true and fair view if they contain sufficient information (in quantity and quality!)to satisfy the reasonable expectations of the users of the financial statements.

Entities

Are reproduced in

Financial reports Income statements Balance sheets

This process is called ACCOUNTING

AUDITING control this process

Fundamental concepts in conducting an audit

Management Implements internal

control Auditor Obtains evidences Tests management Conducts transactions Accumulates transactions into account balances Prepares financial

statement Issues financial statements to users

assertions against

criteria Determines overall fairness of financial

statements Issues audit report to accompany financial

statement

Types of Audit tests

Risk Assessment Procedures

Used to obtain an understanding of the entity and its environment, including

internal controls.

Tests of Controls

Directed toward the evaluation of the effectiveness of the design and implementation of internal controls.

Substantive Procedures

Detect material misstatements in a transaction class, account balance, and disclosure component of the financial

statements.

Audit report -Content

•Title(independent audit report);

•Addressee(to the shareholders of company name);•Opening paragraph-details the location of the financial statements audited and a statement of the responsibilities of management and auditors;

•The audit scope paragraph-describes the nature of an audit,the standards adopted and a description of the work performed;

•Opinion paragraph–contains reference to the financial reporting framework used to prepare the financial statements(i.e.International Accounting Standards)and the opinion on the financial statements;

•Date of the report;

•Auditor’s address;and

•Auditor’s signature.

Types of audit opinions

Unqualified(or Clean or Unmodified)Opinion:

The annual report is presented fairly and,as a whole,is in accordance with GAAP.

There are2types of unqualified opinions:

•Standard unqualified;

•Unqualified with ending explanatory paragraph;