Definition: an auditor's report provides an opinion of the validity and reliability of a company or organization’s financial statements.
When financial statements are finalized, they usually must contain an evaluation – an auditor's report - from an accountant or auditor. The audit report evaluates the validity and reliability of a company or organization’s financial statements.
The goal of an auditor's report is ultimately to document reasonable assurance that a company’s financial statements are free from material error.
Preparing the auditor's report
An audit of a company’s financial statements should result in a report where the accountant or auditor is free to share their opinion about the validity and reliability of a company’s financial statements.
In this report, the auditor should give a true picture of the company and their financial statements. The auditor should also state their connection with the financial statements, and whether they are externally or internally connected to the company.
In their report, the auditor can also share any reservations or additional information. Reservations could arise if the auditor disagrees something within the financial statements, e.g. if the auditor disagrees with management about the valuation of
an asset and they believe that this has a significant impact on the of financial statements.
What must an auditor's report contain?
There are rules about what an auditor's report should include, and in what order various items should be reported.
Auditor's reports must adhere to generally accepted standards established by governing bodies. Standards such as
the UK Generally Accepted Accounting Practice help to assure external users that the auditor's opinion on the fairness of financial statements is based on a commonly accepted framework.
A typical auditor's report will state:
- 1. The company that has been audited and what their accounting method is
- 2. The responsibility of the auditor and their report
- 3. Reservations (if any)
- 4. Conclusion
- 5. Any additional information*
- 6. A management report*
- 7. The date and auditor’s signature
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*Note: Items 5 and 6 are omitted if there is no additional information and/or if management has chosen not to prepare a management report. Management reports are not required, but if one is listed in the financial statements, then the auditor should ensure that it is consistent with rest of the financial statements.