Question

Discuss why the auditors’ reports are important to users of financial statements. What conditions are required to issue a standard unqualified audit report?

Answer 1

Audit reports are very important to the user of financial statement because they give an independent and unbiased opinion of the auditor on financial statement. As interested user or shareholder does not know the internal happening in the company audit report become their only source on which they take significant economic decision. It informs the user about the audior's opinion whether the statements are fairly prepared and stated or not. It is only through the audited financial statement that sharholders are assured that their funds invested are safe and used only for the purpose they were raised for.

Standard unqualified audit report is required because having standard language makes it easy for the user to understand any fraud or misstatement as in case of any misstatement or wrongful operation the auditor will give a qualified audit report. The user will look at the deviation from the standard unqualified report, when their is a different opinion the auditor will specify the same and the user will know if their is anything wrong with the company.

Thus for the benifit of the user it is necessary to issue a standard unqualified opinion.