The Difference Between the 4 Kinds of Audit Reports
Finance is the fuel on which any business runs. Without ample funding, no firm can survive. However, analysing the financial aspects of a firm is what helps a firm use the least amount of finance to be most productive, thereby achieving maximum efficiency. An audit report is a statement containing the audit’s opinion, which is given by independent auditors after examining an enterprise’s financial statements and other related reports like management reports, management accounts and compliant reports. For those looking to avail auditing services in the UAE, this is crucial information.
For all these reports, there is a specific accounting standard followed. The UAE follows the International Financial Reporting Standard (IFRS) to prepare financial statements. For example, an auditing company in the UAE is to conduct its process of audit on the clients or customer’s financial statements in accordance with the accounting standard that was used to prepare those financial statements. Accounting services in the UAE make the task of preparing financial statements easier thereby getting a positive audit report.
In other words, they review whether the financial statement is prepared in a true and fair manner in accordance with the accounting standards. Those standards could be US GAAP, local GAAP or IFRS. Post completion of testing, the auditor further issues the audit report on based on the financial statements that they were audited right before. The audit report will be inclusive of their opinion on the financial statements.
The audit report is of utmost importance since many stakeholders, including the entity’s management, investors, the board of directors, shareholders, banks, government body, and few others rely on it. In most cases, the audit report is issued with the intent to cover financial statements over a period of 12 months or one year
Investors also make use of audited financial statements and audit report and to ascertain the enterprises’ financial position as well as its financial performance for investment opportunities and further growth. Government agencies use these financial statements and audit reports to assess the accuracy and completion of tax that is declared by a firm. False taxation can lead to a lot of problems, hence it is always advised to seek help from a taxation firm in Dubai
The board of directors, as well as shareholders, make use of the audit report to ascertain the transparency of financial statements and integrity of management as well.
Various types of audit reports have different audit’s opinions, and the main cause is from the difference of misstatements that are found in these financial statements. However, different kinds of audit report represent a varied level of guarantee or assurance.
The Types of Auditing Reports
There are four significant types of audit reports which are issued by auditors based on financial statements. While each type of report portrays a different meaning, it also serves as a message from auditors to ones that use financial statements.
These audit reports include Unqualified Audit Report, also known as the Clean Audit Report, Adverse Audit Report Qualified Audit Report, and Disclaimer Audit Report. Let us discuss these in detail.
Clean Audit Report (Unqualified Audit Report)
A clean or unqualified audit report is one that is issued by the auditor to financial statements when the auditor has found no material or critical misstatements after their final testing. This report includes the unqualified opinion given by an independent auditor.
This report shows that the enterprise’s statements are prepared and presented in a fair and compliant manner with the appropriate accounting framework used.This is a good sign for all kind of stakeholders that are willing to use the financial statements. The cue to check if the audit report is clean or not is in given opinion paragraph.
Clean Audit reports are not only portrayed as a true and fair presentation of financial statements but as free from all material misstatements. Further, they also imply that the team has high integrity. A clean audit can be obtained through accurate financial statements using accounting services in Dubai.
It is however advised that before having a view on the audit report to make sure that that the auditor who has issued the reports are from certified independence audit firms. There, various auditors who are certified like DMCC certified auditors, JAFZA approved auditors etc. in the UAE.
Qualified Audit Report:
The qualified Audit report is a report that is issued by auditors to the financial statements that contain material misstatements. However, these material misstatements are collective.
E.g. the opening balance of the entity contains a large number of inventories that cannot be verified.In such a scenario, the auditor issues a qualified audit opinion on the said qualified audit report. But if the auditor thinks that the misstatement is not collective, then the auditor will issue an adverse opinion in the report.
In the said report, only inventories mentioned are significant. Any other information in the financial statements is true and fair.In terms of significance, the qualified audit report is far more serious than an unqualified one due to material misstatements found on items or accounts mentioned in the financial statements.
Adverse Audit Report:
Adverse Audit Report is an audit report issued to the financial statements when auditors find material misstatements in the financial statements. Misstatements found here are quite different from material misstatements found in a qualified audit report. Not only are they material misstated, but they also affect other items and accounts in the whole financial statement.
These are called pervasive. This means that all the items and accounts in the whole financial statement cannot be trusted by shareholders, stakeholders and other investors. This report has auditors listing down client names, financial statements that were audited as well as the period the said financial statements covered. Auditor will also state all the misstatements found and how they affect the financial statements as well as the users of these financial statements.
Disclaimer Audit Report:
The disclaimer audit report is a report is issued to the financial statements where the contents of a financial statement are not sufficient enough for the auditor to obtain evidence to support their opinion. This happens when auditors are prevented from accessing information related to accounts or items in financial statements while those items or accounts are believed to be misstated as well as pervasive.
Need Help?
Are you in need of auditing services in Dubai? Our team of DMCC auditors, as well as JAFZA, approved auditors can help you with any of your financial services. Feel free to contact us and we’d be more than happy to help you.
Read More About Audit Reports
Importance and Need of Internal Audit Report
Why is Professional Audit Report Important for an Organization?
All you must know about an Audit Report
Audit Report-A Vital Instrument for Every Business
What are the Parts in an Audit Report?
