What is Audit Report of a Company?

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:

• Unmodified or unqualified opinion
• Qualified opinion
• Disclaimer of opinion
• Adverse opinion