Audit Report - Elements and Format | Caro 2020 | Company Law Notes for BCom, BBA and MBA | CBCS Pattern

Audit Report - Elements and Format (Caro 2020)

Provisions of the Companies Act ' 2013

Company Law Notes for B.Com, BBA and MBA


Audit Report

Audit report is a statement on financial position of the company which is issued after the conclusion of audit. It is a medium through which an auditor expresses his opinion on the financial statements under audit.  It generally shows the nature and scope of audit conducted by the auditor and his opinion on the final accounts of the company. It is an important part of audit because it provides the results of the audit conducted by the auditor. The audit report is the final and ultimate report of audit process.

Elements of Audit Report or Essentials of Good Audit Report

1. Title: An auditor report must have appropriate title, such as "Auditor's Report". It is helpful for the reader to identify the auditor's report. It is easy to distinguish it from other reports. The management can issue any report about the business performance. The title o the report is essential. 

2. Addressee: The addressee may be shareholder or board of director of a company. The auditor can audit financial statements of any business unit as per agreement. The report should be appropriately addressed as required by engagement letter and legal requirements. The report is usually addresses to the shareholders or the board of directors. 

3. Date of Report: The report should be dated. It informs the reader that the auditor considered the effect on the financial statements and in his report of events or transactions about which he become aware the occurred up to that date.

4. Identification: The audit report should identify the financial statement that have audited. The financial statement may include trading profit and loss accounts, balance sheet and statement of changes in financial position and sources and application of frauds statement. The report should include the name of the entity. Moreover the data and period covered by the financial statement are also stated in it. 

5. Reference to Auditing Standards: The audit report should indicate the auditing standard or practice followed in conducting the audit. The international auditing guidelines need assurance that the audit has been conducted as per set standards. 

6. Opinion: The auditor's report should clearly state the auditor's opinion on the presentation in the financial statement of the entity's financial position and the result of its operations. The statement give a true and fair view is an auditor's opinion. This opinion is usually based on national standard or international accounting standards. 

7. Signature: The audit report should be signed in the name of the audit firm, the personal name of the auditor or both as appropriate. 

8. Auditor's Address: The address of auditor is stated in the audit report. The name of city is stated in the report for information of the readers. 

Format of Auditor’s report as per Companies (Auditor’s Report) order, 2020 (Caro)

The ministry of corporate affairs has laid down the new format of statutory audits of companies which includes the following details:

1)        Details of tangible and intangible assets.

2)        Details of inventory and working capital.

3)        Details of investments, any guarantee or security or advances or loans given.

4)        Compliance in respect of a loan to directors.

5)        Compliance in respect of deposits accepted.

6)        Maintenance of costing records.

7)        Deposit of statutory liabilities.

8)        Unrecorded income.

9)        Default in repayment of borrowings.

10)     Funds raised and utilisations.

11)     Fraud and whistle-blower complaints.

12)     Compliance by a Nidhi.

13)     Compliance on transactions with related parties.

14)     Internal audit system.

15)     Resignation of statutory auditors.

16)     Non-cash dealings with directors.

17)     Registration under Sec. 45-IA or RBI Act, 1934

18)     Cash losses.

19)     Material uncertainty on meeting liabilities.

20)     Transfer of funds specified under schedule VII of the Companies Act’ 2013.

21)     Qualification or adverse auditor remarks in other group companies.

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