Question

What are the differences in the standard audit reports for public and nonpublic entities? What are the key features and parts of each?

Answer 1

1)Ans-Standard Audit report for public:-An auditor gives an independent report (“opinion”)
on an entity’s financial and service performance
statements. These statements are an important
part of an entity’s annual report and the auditor’s
report is a guide for the reader about the reliability
of the information in the annual report.
When the audit team looks at an entity, they’ll be
looking for accurate reporting of both financial and
service performance information.
The auditor’s report says whether you can rely
on the information in the financial and service
performance statements in the annual report.
The auditor giving the opinion won’t have looked
at everything, but they understand financial and
service performance systems and reporting a lot
better than most of us ever will. They will look at
riskier and more significant matters to ensure that
they are reflected correctly in the annual report.
The auditors’ report is usually accompanied by
a management report or management letter
that will give more detailed information and often
suggestions about areas where an entity can look
for improvements in the future.
Standard Audit report for non public:-Full “adverse” opinions

Name of Entity Financial Statements Period Ended Reason for Opinion

New Zealand Railways Corporation 30 June 2004 We disagreed with the recognition of provisions for claims and litigation relating to the previous operations of the business. In our opinion, these provisions did not constitute a liability of the Corporation.

Queen Elizabeth II Army Memorial Museum 30 June 2004 The Board did not recognise the museum collection assets it owns; nor the associated depreciation expense in its financial statements. These are departures from Financial Reporting Standard No. 3: Accounting for Property, Plant and Equipment (FRS-3), which requires museum collection assets not previously recognised to be recognised at fair value and depreciated. In addition, we were unable to verify some material revenues due to limited control over those revenues. We also reported that we were unable to express an opinion as to whether the comparative information in the Statements of Financial Performance and Position was fairly stated, due to a qualification expressed on the prior year’s financial statements.

RNZAF Museum Trust Board 30 June 2004 The Board did not recognise the museum collection assets it owns; nor the associated depreciation expense in its financial statements. These are departures from Financial Reporting Standard No. 3: Accounting for Property, Plant and Equipment (FRS-3), which requires museum collection assets not previously recognised to be recognised at fair value and depreciated. We also reported that, if it were not for the departure from FRS-3, the financial statements would have fairly reflected the Board’s financial position, results of operations and cash flows.

2)Ans-There are six essential features or characteristics of standard Audit report for public are;

Systematic process
Auditing is a systematic and scientific process that follows a sequence of activities, which are logical, structured, and organized.

Three-party relationship
The audit process involves three parties, that is, shareholders, managers, and auditors.

Subject matter
Auditors give assurance on a specific subject matter. However, the subject matter may differ considerably, such as – data, systems or processes and behavior.

Evidence
The auditing process requires collecting the evidence, that is, financial and non-financial data, and examining thereof.

Established criteria
The evidence must be evaluated regarding established criteria, which include International Accounting Standards, International Financial Reporting Standards, Generally Accepted Accounting Principles, industry practices, etc.

Opinion
The auditor has to express an opinion as to the reasonable assurance on the financial statements of the entity.

Parts of standard Audit report for public:-
Report Title
The report title must include date of the audit and the addressee of the report. The date of the report is usually the accountant's last day of fieldwork, and the addressee is usually the board of directors or stockholders of the organization. It is also important to include the work independent in the title to set it apart from internal audits within an organization.

Introductory Paragraph
This is usually a boilerplate text that states an audit has been carried out, identifies the financial documents used to perform the audit and places the important caveat that the company's management team is responsible for the accuracy of the financial statements. It also determines what time frame is covered by the audit.
Scope Paragraph
This paragraph says the audit followed the rules and methods set by the Generally Accepted Audit Standards and was designed to provide reasonable assurances that the claims made by the financial statements are accurate. It also indicated the test methods used by the auditors to test the accounting methods used by the company.

Executive Summary
This section includes a summary of the audit's findings. The content of this summary is determined by what the auditor considers to be important for the executive echelons of the company. Unlike the next section, the executive summary does not provide much opinion but focuses instead on expressing clearly the findings of the audit.

Opinion Paragraph
The opinion paragraph is used to report on the financial situation of the company or individual audited and the methods and procedures used to reach a conclusion. It then offers the auditor's opinion on the financial health of the organization and its conformity or nonconformity with the Generally Accepted Accounting Principles.

Auditor's Name
The auditor must identify himself as the author of the audit by printing his name at the end of the audit. If the auditor works for a specific firm, he must also include the name of the company or certified accountant he works for.

Auditor's Signature
The auditor is held accountable for the results of his audit up to the date stated in the audit's title. This accountability is acknowledged by the signature of the auditor below his name.

The management's responsibility section of the standard audit report for a non-public company states that the financial statements are: ... The scope paragraph states that the auditor evaluates the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management.