The audit report is a kind of disclaimer issued to the entity under audit after an internal audit or external audit. An audit report is the end result of an assurance engagement that required the appointment of an auditor. This report contains the findings and relevant opinions of the appointed internal or external auditor in relation to the activities they have undertaken to examine the relevant material or documentation owned by the entity under audit.
Also referred to as an auditor’s report, the audit report is an important tool for those who have sought assurance services and appointed an auditor. The report communicates the findings of the audit or assurance engagement to the relevant parties but is written and compiled in a standardised format so that other parties without prior experience with the audit engagement can interpret and make use of the findings contained in the report.
The audit report is designed to communicate the auditor’s findings and opinions on the material that was examined during the audit process. It also contains a disclaimer, or a statement describing the scope and nature of the audit / assurance engagement, the rights and obligations of the parties involved, and the processes undertaken as part of the engagement which led to the findings and opinion contained in the report. This disclaimer is important, because those reading the audit report must be aware that the findings and / or opinion contained in the report are not without a degree of risk or uncertainty, which must be considered when interpreting the contents of the report.
Audit reports function as a vital assurance tool that enables third-party users of information or documentation, particularly financial statements and disclosures, to see that the information is certified by an independent and approved auditor. This ‘certification’ is the basis of assurance because it enables investors, creditors, regulators, and other stakeholders to interpret the information with the knowledge that it has been subject to independent testing and verification.
Internal audit processes may be carried out by in-house staff, or as a consulting activity through a firm offering internal audit services. Internal audit procedures may target a range of systems or processes within the entity under audit, such as effectiveness of internal control systems, risk-management practices or governance processes. Once the internal audit has been completed, the appointed auditor will issue a report containing an accessible summary of the audit findings, including relevant opinions or recommendations, that the entity may use to formulate a response.
Internal audit reports are used to assist the entity under audit in making its control, risk, and governance processes more effective and efficient. An internal audit may also be undertaken with the aim of clarifying particular assertions or disclosures that relate to the entity’s financial or operational reporting.
Structure and contents
Internal audit reports typically contain an executive summary or introduction, followed by findings, a conclusion, and appendix section with detailed information such as charts and graphs. This formulaic structure of the audit report enables its users to efficiently interpret and address the findings.
The most important section of the audit report is the findings, with each finding broken up into roughly five parts:
- The nature of the finding, i.e., the problem or issue identified.
- The criteria or standard used to define the issue, i.e., was a standard or policy not met?
- Why the problem or issue occurred.
- What consequence or risk does the finding convey?
- Corrective action which may be undertaken to address the finding.
Financial audit reports are issued to convey an opinion as to whether the financial statements issued by the entity provide a true and fair view of the relevant transactions / processes that is compliant with the reporting obligations and accounting standards that affect the entity. Unlike internal audit engagements, financial audits must strictly comply with the Australian Auditing Standards and professional practice requirements for approved auditors. As a result, the conclusion of a financial audit report may be taken only as an opinion. The utility of the report is therefore reliant on the professional judgement of the appointed auditor.
Similar to the internal audit report, a financial audit report sets out individual findings and combines this information into a conclusion containing the auditor’s opinion. For more information, the Australian Auditing and Assurance Standards Board has published this example of a financial audit report.
Get in touch with our leading team of auditors Melbourne at Kingston & Knight Audit for more information on what you can expect to find in an audit report. We are proud to assist Melbourne companies, organisations, and entities by providing audit and assurance services to the highest professional standard. As approved company auditors, we can complete the audit of financial statements that is a yearly requirement for Australian listed companies. Kingston & Knight Audit is also an approved Self-Managed Super Fund auditor, as well as an experienced trust account auditor.
Our auditors Melbourne provide a range of services that are designed to make audit and assurance easy for you or your organisation. We are committed to delivering best-practice audit and assurance services that enable stakeholders to rely on your statements and disclosures when making the decisions that will shape your operations and outlook moving forward. Contact Kingston & Knight Audit on 1800 283 471 , or email us at firstname.lastname@example.org, our auditors Melbourne look forward to informing you about your audit report and the information it contains.