What is an Unqualified Audit Report?

What is an Unqualified Audit Report?

According to the requirement by the board of directors, the intention of the management, or by law, companies will usually engage an independent audit firm in Johor Bahru to audit their financial statements yearly.

Generally, if the auditors did not find any crucial problems on the financial statement of the company, they are going to issue an unqualified report.

The auditors will issue an unqualified audit report to the financial statements when they did not discover any material misstatements after conducting the testing (Also see Introduction to Audit Strategy). The independent auditors will include their unqualified opinion in this report. This indicates that the company has prepared and presented its financial statements by adhering to the accounting standards they utilise.

Besides, the company has applied the materiality concept (Also see What is Audit Materiality) accurately when it presents its financial information.

There are many accounting standards that a company could comply with, for example, the FRS and the GAAP from the United States. These are the two standards that are dominating the accounting world nowadays.

However, some countries require local firms to adhere to the local accounting standards or the local GAAP.

What is the importance of an unqualified report to a company?

An audit report is necessary for the organisation to follow the law and the criteria of its board of directors. An unqualified report is even more essential for the company as well as the management which is operating it.

This report verifies whether the management has been maintaining its integrity to shareholders or owners at a reasonable level.

Some companies may require funds or financial services from the banks. Therefore, they usually need this report. This report can also make the application process faster and makes the bargaining power of a company to be higher in the process of negotiation.

Essential Information in the Audit Report:

Listed below are the vital information in an audit report. The information in it covers company information, report of directors as well as other essential controls (Also see A Checklist for Ways to Assess Internal Controls). Typically, in the audit report, you will see the management reports first before you see the auditor’s opinion.

After that, you will see five financial statements, which are the balance sheet, income statement (Also see What is the Relationship Between the Profit and Loss Statement and the Balance Sheet?), statement of cash flow, statement of change in equity, as well as the notes to financial statements.  

Those statements illustrate the company’s financial information throughout the particular audit period.

Listed here are the vital reports:

– Corporate information

– Notes to financial statements

– Report of the directors

– Report of the independent directors

– Statement by directors

– Statement of cash flow

– Statement of change in equity

– Statement of financial position