Audit reports can be complicated if there is no available sufficient information and the information offered is subjective. This means auditors require to make multiple judgmental assumptions in your finalizing reports. Remember that the audit opinion is an essential part of your audit report since it provides investors’ opinions about its financial status. The audit report offers an image of your company’s financial performance in a given financial year.
These reports are usually analyzed with investors, and they help them make sound investment decisions based on the information the audit report incorporates. In many cases, investors are usually interested in the audit opinions because it bears the integrity reflection of your audit report. Furthermore, the audit opinion gives you a clear picture of the company. This article will give you an insight into the audit report template.
What is an Audit Report?
An audit report describes independent auditors’ internal accounting controls and financial conditions. This report is mostly used by investors, stakeholders, shareholders, and the company’s investors. The auditor creating this report must be unbiased and meticulous. Besides, the auditors make this report annually after going through the organization’s financial statement. An audit report offers you a clear image of the financial status of your company. In a nutshell, it is an organization’s financial health summary.
What Is an Audit Report Template?
An audit report template refers to a written document that features the auditors’ opinion concerning any entity’s financial statements. However, when preparing this report, ensure you utilize a standard format mandated by Generally Accepted Auditing Standards (GAAS).
Audit Report Templates & Examples
When Do You Need an Audit Report?
The audit report templates feature three developed paragraphs. These paragraphs contain the auditors’ opinion concerning the entity’s financial statements, the audit report scope sample, the entity’s management, and auditor responsibilities. Audits are essential since they offer another individual to go through the business account, such as a certified professional accountant. Business investors and lenders require audits annually as one of the primary conditions to invest in your business.
Ideally, it is good to have your current audit report to showcase to your potential investors whenever they ask for one. Most organizations usually hire CPA auditors to make audit reports after viewing some of the audit reports. Below are a few services CPA auditors might carry out for you:
After finishing the audit examination, you can hire a CPA to develop an audit report sample. This comes with a statement stating whether your company created its financial report accurately. Audit requirements are run depending on whether you feature a private or public business.
Remember, public businesses entail not trading in the entire public market. On the other hand, federal laws usually do not need any yearly audits from these businesses. However, lenders and investors might need it to invest in your business.
Public businesses include ownership and debt securities traded in the United States of America public markets.
You must know that CPA auditors are individuals who offer your organization its yearly physical examination. This exam covers problems your company might not know, and audit reports keep the company on its toes.
Essential Elements of an Audit Report Template
Nothing is essential in business like the audit report since it incorporates the entire audit process. Many business owners use financial statements, such as investors, lenders, and customers, among other individuals who decide and plan based on the company’s internal audit report. You must understand that audit reports are crucial since they influence the value of any given audit financial statement.
Therefore, auditors need to be careful when issuing their audit reports, and audit reports must be unbiased and offered objectively. Below are essential elements of an audit report template you must use to achieve the required standards of auditing:
- Audit report date- Refers to when your auditor signed your report.
- Signature placement- Refers to the city the auditor signed the report.
- Auditor’s signature- Ensure that your auditor puts his signature on your internal audit report template.
- Other reporting responsibilities- Suppose there are any other reporting responsibilities, ensure as the auditor you mention them in your report.
- Opinion basis- State on what basis the entire report was achieved. To make this part, more interesting ensure you include facts about your basis.
- Opinion- This element needs you to capture the overall impression you got from your financial statement audit. Make sure you also discuss varying kinds of opinions in a detailed way.
- Auditor’s responsibility- You need to mention the auditor’s responsibility expressing they are unbiased in terms of objectives concerning your financial statement. And they are issuing accurate audit reports.
- Addresses- As an auditor, you must mention to who you are offering the report.
- Title- Your title must state that your document is an independent auditor’s report.
The elements mentioned above are the crucial basic subheading and headings you must include in your audit report sample. You can add extra information but ensure you remain relevant.
How to Write an Audit Report (Step-by-Step)?
As mentioned earlier, an audit report is a formal opinion of audit findings. An efficient audit report is crucial to ensuring that your audit report is presented usefully to the party getting the audit. Here is an overview of several steps that will guide you to write an audit report.
Part 1- Preparing to create an audit report
Step 1- Understand all the basic audit’s report goals
Before you write an audit report, ensure you have a broader view of the primary objectives of the entire audit report. With this view in mind, you will likely develop an effective audit report that illustrates non-conformities and outlines positive. You will also be able to highlight areas that need improvement.
Step 2- Think about who is likely to read the report
You must also think about the person going through the audit and what language they understand best. Remember that an audit report is an official audit project record, and it can be returned in the coming future for a re-audit. Therefore, ensure that you define abbreviations and terms you use since the communication standard form has a maximum potential to change.
Step 3- Learn varying types of audit
Auditing is an official examination that verifies if the correct procedures and policies were followed. Remember audit can take multiple forms, such as:
- Investigative audit: This type of audit is best when there is a violation of rules, laws, and regulations and involves a mix of other types of audit.
- Compliance audit: Compliance auditing is usually done to determine if a program or organization functions following procedures, regulations, policies, and laws.
- Operational audit: It review how the organization utilizes the resources and makes sure that those resources are used effectively and efficiently to meet the organization’s goals and mission.
- Financial audit: This type of audit is commonly used. It reviews the organization’s financial reporting, ensuring that the entire information conforms to GAAP standards and is valid.
Step 4- learn audit opinion types
Suppose you are preparing to write an audit report; it is essential to understand four basic opinions you can comfortably express. These types of opinions include a disclaimer opinion, an adverse opinion, a qualified opinion, and an unqualified or clean opinion.
Part 2 Begging the report
Step 1- Familiarize yourself with audit reporting styles before you commence
To create any given audit report, you must follow specific style guidelines. Thus, it is appropriate you understand these principles before you commence writing.
- Avoid using audit buzzwords
- Use neutral gender terms
- Use bullet points,
- Avoid passive voice
- Be clear and concise. Offer a perspective for your reader and have a balance between positive and negative results of your audit
Step 2- Outline the audit report
Before you commence writing your audit report, ensure you go through your audit results and outline the report based on the entire sections you will require. The standard outline includes a subsection utilizing lowercase numerals, numbers, or letters. Ensure you pick an organizational strategy that works effectively and start from there.
Step 3- Write the introduction
An introduction gives you an overview of information concerning the audit area. It ensures that the reader is familiarized with any background they require before going through the full report.
Step 4- Follow using the scope methodology and purpose
This part offers information concerning your audit, and you should be able to address the methodology used in the auditing and answer the questions below:
- What were the objectives of the audit?
- What was the duration of auditing?
- What was not included or included in the audit?
- Why was this audit conducted?
Step 5- Proceed to Statement on auditing standards
If the audit is a basic disclaimer, individuals will investigate to ensure it was achieved correctly. Therefore, the statement on auditing standards should indicate that the report was conducted based on the government’s standards.
Step 6- Come up with an executive summary
This represents an audit result summary, and it should feature a recommendation to the scope methodology and purpose. On the other hand, it should also offer an overall conclusion.
Part 3 Writing the results and recommendation
Step 1- Create an opening statement for your recommendation or findings section
The audit report ends with results and recommendations on boosting the organization audited. Furthermore, recommendations and results are a great foundation of a perfect report. Before writing this part, ensure you offer the reader a short statement, which outlines the information you will be offering.
Step 2- Understand effect, cause, criteria, and condition
The results of your findings rely on the terms mentioned above, and when you address each of them, you will undoubtedly find an excellent report.
Step 3- Make an efficient recommendation
A final task is to make a recommendation that will enhance the entity audited. List them together under a lead statement. Remain specific and positive when writing the recommendation. Make sure you keep your recommendation brief and identify who needs to act.
Step 4- Follow the correct format
To make your auditing report polished, ensure you follow the correct format before sending it. You must have a cover page, then a memo, and a table of content. The language should be non-technical, plainly worded, and make sure you organize your paragraphs and use perfect grammar. In addition, reports are usually organized by chapter, title, sections, and subsections, and each must feature a heading. Your heading should run from general to being more specific.
Audit Report Format Example
Below is an audit report format example:
Auditor’s independent report
To (Mention the company’s name)
Report on financial statements
We were able to audit the consolidated balance sheet of (Mention the company’s name) on November 22nd, 2021. Besides, the sheet was accompanied by a related statement of cash flow annually, stockholder’s equity changes, retained earnings, comprehensive income, and income. We also featured an accounting policies synopsis, among other details. Similarly, we also managed to audit the firm internal control over the financial reporting on November 22nd, 2021.
Management’s duties for financial statements
The financial statements given are a Firm’s management responsibility. Furthermore, the company board of directors is accountable for matters concerning the preparation of financial statements, which offer a fair and genuine view of the company’s financial status. And the Firm’s cash flow and financial performance agree with the accepted accounting principles in the USA.
Therefore, our primary responsibility is to express a major opinion based on these given financial statements audit. Bear in mind that this auditing had been done based on the auditing standards accepted in the USA. This plan allows us to perform and plan our audit to get a financial statement assurance and ensure it is free from any possible frauds and misstatements. In the end, our audit will generate a basis responsible for our opinion. In our view, the financial statement presented on November 22nd, 2021, conforms with the accepted accounting principles in the USA.
Tips for Writing an Audit Report
The type of report you create does not matter. What matters is following the formal business format of an official letter. Below is an overview of tips that will guide you in writing a perfect audit report:
Introduction and title
You must offer your document an official title. And ensure it is clear, straightforward, and simple. On the other hand, you must also mention that it is independent to show that it is unbiased and the audit report is correct. After writing the title, introduce your report, and a single paragraph is sufficient to make an introduction. This section includes the date the audit was conducted and the organization’s name.
Here, you need to explain and clarify the entire responsibilities of your company director and auditors. State the company’s management team’s responsibilities to provide you with the necessary financial documentation to complete the auditing process successfully. Furthermore, the auditor-generated data must be 100% accurate and to the best of their ability and knowledge. In this section, remember to include the auditor’s role, which is to go through the company’s financial statements.
Last but not least, compose the basis of your opinion. Commence with the auditors’ opinion as you explain it out. Proceed and explain how the audit was conducted. This will enable you to comply with GAAS standards. When you describe your entire auditing process, ensure you include essential and relevant resources to support your opinion.
Types of Audit Reports (Opinions)
There are four primary types of audit reports. As a result, what you choose to use roles down to a personal preference. The following are the four types of audit reports:
Averse opinion – Adverse audit report
Most people consider it the last type of audit report because it holds an adverse opinion. In addition, auditors who discover irregularities and maximum material misstatements level or are less satisfied with financial statements are aware that the government and investors will mistrust the company’s financial report.
The auditor’s adverse opinion usually raises eyebrows since it indicates that your financial reports have sufficient potential for fraud and features misstatements. Bear in mind that adverse opinions signal that the company’s records were not prepared according to GAAP standards. Remember, all financial institutions usually take this seriously and might reject engaging in any business with your company.
Disclaimer of opinion- disclaimer report
When auditors provide a disclaimer opinion report, you must understand that they are distancing themselves from giving any opinion related to its financial statement. This happens mostly when the auditor feels that the organization limits its performance potential. If not, then the auditors did not give an excellent explanation to the queries they posed. Similarly, they might not have understood how some transactions were made and lacked sufficient evidence to support outstanding financial reporting. In this case, a disclaimer is necessary and very appropriate. When an auditor uses this type of auditing report, the company is likely to develop a negative image.
Qualified opinion/ qualified report
This auditing report is usually used when the auditor is not confident enough concerning any transaction or specific process used in the financing department. As a result, it prevents them from providing clean reports. The auditor might opt to use the qualified opinion report in such scenarios. When investors are offered this report, they find it unacceptable because it negatively affects their financial health. Auditors might provide a qualified opinion because they failed to present its potential records with GAAP.
Unqualified opinion- clean report
The unqualified opinion is also called a clean report. Most auditors usually issue out this type of report. Likewise, many companies love and expect auditors to offer this type of report. It does not feature adverse comments or includes any audit Process or clauses disclaimers. This kind of report shows that the auditor is 100% satisfied with the company’s financial report. In addition, the auditor believes that the organization’s organization operation complies with the governance applicable laws and principles. This auditing report indicates that your company is not biased; hence, investors will be willing to invest in your company.
You must understand that auditors usually use all the models of qualified reports to alert the public about the companies’ accountability, reliability, and transparency. Remember, auditor opinions or reports pressure companies to alter their financial reporting process. And it also incorporates exercises, such as cybersecurity health governance and ESG, which makes their report accurate and clear. The public and companies’ investors highly value unqualified reports.
What is the primary purpose of the audit?
The primary purpose of auditing is to certify and verify that the company account has been established according to the accounting principles. It also ensures that its financial statements are fair and unbiased and are per the GAAP.
How do I write an audit report for a company?
You need a few steps to guide you write an audit report for the company. These steps include:
- State the specific date, location, and time to start your auditing report.
- Explain all the steps that the auditor used in the entire process of auditing
- Offer data and evidence recorded during the entire auditing process
- State down all conclusions based on your data
- Date and sign your audit report
What is a qualified opinion in an audit report?
Qualified opinion in an audit report indicates a limitation during auditing that was not persuasive, projecting a negative vibe about the financial health or status of the company. Qualified opinions are due to the company not presenting its entire records with the GAAP.
You are now 100% familiarized with the audit report template with the detailed post above. Auditors usually make auditing reports to show the public how the company is accountable, transparent, and accountable. Investors usually need this document before they invest in any company. Follow the guidelines above to write an auditing report of your company, and it should be per the GAAP standards.