Question

R15.1: Why does the standard unmodified report on the financial statements of a private company contain paragraphs outlining (1) management’s responsibility for the financial statements and (2) the auditor’s responsibility for the financial statements? What is contained in these paragraphs ?

R15.2: What is the significance of the date on the auditor’s report on the financial statements?

Answer 1

(1) Management responsibility of the financial statements signifies the importance that management is responsible for the preparation of financial statement. While preparing financial statement, management needs to adhere to all the reporting requirement as per applicable financial reporting framework. Hence a separate para is given in the report so that stakeholder's should be aware of this fact.

(2) Auditor's responsibility states the fact that the auditor is only responsible for giving their opinion on the financial statements. The opinion must be true and fair and should disclose the fact that financial statements is not materially misstated. This fact is clearly elaborated in the auditor's responsibility paragraph.

(3) The date of auditor's report signifies that the financial statements are now authorized and users of financial statements can now place their reliance on audited financial statement. Further the company can now distribute these financials in public domain. So date of auditor's report is a crucial part for the overall authorization of financial statements.