Question

In phase 4 of the audit, complete the audit and issue an audit report, there are five activities required, discuss what occurs in each activity. What ultimately determines the specific audit procedures necessary to provide an independent auditor with a reasonable basis for the expression of an opinion?

Answer 1

Importance of Audit Report

i. An Audit report is the end product of the auditing and is very important & concluding part of the audit process.

ii. Audit report gives the auditor’s opinion on the accounts & record of the company, as examined by him.

iii. Audit Report reflects the work done by the auditor

iv. Audit report is the instrument which, measures the auditors responsibility in regard to the true & fairness of the financial statement of the company

v. Audit Report indicates the real position of the financial status of the company & which is used by different people as a reliable document

Introductory Section

The introductory section identifies whom the audit report was prepared for. It states why the audit was conducted and names the person who conducted the audit. The introduction confirms the representations you made about the accuracy of your financial statements and business information. The introduction gives an overview of your business operations, the long-term financial planning and your cash management policies and practices. It assesses your insurance policies as part of your risk management planning.

Financial Section

The financial section is an assessment of your financial statements based on the auditor’s testing. The auditor identified which financial statements were tested and confirmed that the audit was conducted in accordance with generally accepted auditing standards. The income statement and balance sheet are normally examined during the audit. The financial section discloses the test sample scope and includes the auditor’s opinion of whether your financial statements conform to Generally Accepted Accounting Standards.

Required Supplemental Section

Documents that are needed to clarify information contained in the financial statements are found in the required supplemental section. These documents are not part of your financial statements but are additional stand-alone documents. For example, a required supplemental document would compare your budgeted inventory projection with the actual inventory consumed. The auditor is responsible for examining and test sampling the supplemental information. The auditor must disclose if the supplemental documents are inadequate or if you decided not to provide them.

Findings Section

The audit report winds up with a list of findings that identifies where your accounting system could be improved.

Recommendations Section

The auditors provide specific recommendations that you may decide to implement. For example, the auditor may recommend that you set up a system to investigate the reasons for a large divergence between the estimated merchandise sales and the actual amount sold. The auditor will also include information about the benefits associated with implementing the suggested recommendations.

specific audit procedure express an openion by independent auditor

1) inspection of records or documents,bills,vouchers

(2) inspection of tangible assets,contracts of intangible asset

(3) observation of process&procedures

(4) inquiry of emploees, customers,suppliers etc

5) confirmation from internal & external sources

(6) recalculation

(7) reperformance,

(8) analytical procedures,

(9) scanning,