Presentation

Audit Report
 Name Of Presenters

Syeda Saba Batool 18221554-023

Rosheen 18221554-010
Saqib Sarwar 18221554-005
Muhammad Umar 18221554-007
Kinza Arzoo 18221554-045
 Contents of Discussion
• Define Audit report
• Describe the essentials of audit report
• Explain the types of audit opinion
• State the kind of audit report
• List the explain the steps involved in preparation of
audit report
• Explain the clean or unqualified report
• Explain the qualified report
• Explain the statutory report
• Explain the solvency report
 Define Audit Report &
Essentials Of Audit Report
Syeda Saba Batool
Roll no: 18221554-023
 DEFINITION OF AUDIT REPORT

DEFINITION

Leo Herbert says that “the audit report is final work

of the audit that communicates the results of the
results of audit to a third party attesting the
accountability of second party”.
 ESSENTIALS OF AUDIT REPORT

• Title
• Address
• Identification
• Reference to auditing standards
• Opinion
• Signature
• Auditor’s address
• Date report
Types of Opinion
Rosheen
Roll no: 18221554-010
 Types Of Audit Opinion

• Unqualified opinion
• Qualified opinion
• Adverse opinion
• Disclaimer of opinion
 Clean or unqualified report

• Clean report
• “A clean report means that the company's financial
records are correct and conform to the guidelines
set out by GAAP. A majority of audits end in
unqualified, or clean, opinions”.
 Qualified report

• Qualified Opinion
• “A qualified opinion means that although a
company didn't follow the proper accounting
standards, the company didn't do anything
wrong”.
 Adverse Opinion
• Adverse Opinion
• An adverse opinion means that the auditor found that not
only did the company not follow accounting guidelines, but
there were discrepancies in the financials.
• An adverse opinion indicates that the auditor might have
suspicions of material misstatements or misrepresentations in
the financial statements, but does not have enough evidence
to clearly express that opinion.
• An adverse opinion is the worst possible outcome for a
company and can have a lasting impact and legal ramifications
if not corrected.
 Disclaimer of Opinion
• Disclaimer of Opinion
• A disclaimer of opinion means that for some
reason, the auditor couldn't complete the
audit or chooses not to provide an opinion on
the company.
• Examples can include when an auditor can't
be impartial or wasn't allowed access to
certain financial information.
 Kind of Audit
Saqib Sarwar
Roll no: 18221554-005
 Kinds of audit
• Statutory report
• Report for prospectus
• Solvency report
• Final report
• Partial report interim report
• Clean-report
• Qualified report
• Management letter
• Internal report
• Annual report
 Steps involved in preparation
of audit report

• Information For Audit Purpose

• Books Of Accounts
• Final Accounts
• Accounts Provide Information
• Expenditure Incurred And Business Conducted
• Zakat Deducted
• Clean Or Qualified Report
Prepare Specimen Of Clean
Or Unqualified Report
Muhammad Umar
Roll no: 18221554-007
 Clean or unqualified report

• Clean report
• “A clean report means that the company's financial
records are correct and conform to the guidelines
set out by GAAP. A majority of audits end in
unqualified, or clean, opinions”.
 Contents Of Unqualified
Report
• The auditor has obtained all information and explanation, which was
necessary for the purpose of audit.
• The books of accounts have been kept as required under the Companies
Ordinance 1984.
• The balance sheet and profit & loss account or the income and expenditure
account have been drawn up in conformity with the Companies Ordinance
1984 and in agreement with books of account.
• The auditor gives his opinion about true and fair view of the (A) balance
sheet at the end of its financial year (B) profit and loss account or income
and expenditure account and profit, loss, surplus or deficit for its financial
year and (c) the cash flow statement for its financial year
• The zakat deductible was deducted by the company and deposited in the
central zakat fund under the zakat and usher Ordinance
 Reasons for
Unqualified report
• Proper books
• Proper statements
• Agree with books
• Companies ordinance
• Proper accounting methods
• Full disclosure
• Access to books
• expenditure incurred
• True and fair view
• No errors and frauds
• Zakat deducted
 Qualified report
Qualified Audit Report:
• The qualified Audit report is the report that issue by auditors to
the financial statements that found material misstatements on them.
But those material misstatements are not pervasive.
• For example, the opening balance of the entity contains a large
number of inventories that could not verify.
• In this case, the auditor issue a qualified audit opinion on the qualified
audit report. However, if the auditor thinks that the misstatement is
pervasive, they will issue the adverse opinion in their report.
• This kind of report, only inventories that mention are matters.
Others information in the financial statements is true and fair.
 Reasons for
qualified report
• No proper books
• Informal statements
• Disagreement between books and statements
• Inconsistent accounting policies
• Inappropriate accounting method
• Breakdown of accounting system
• Failure to prove cash sales
• No zakat deduction
 What Is Solvency?
• Solvency is the ability of a company to meet its long-
term debts and financial obligations.
• Solvency can be an important measure of financial
health, since its one way of demonstrating a company’s
ability to manage its operations into the foreseeable
future.
• The quickest way to assess a company’s solvency is by
checking its shareholders’ equity on the balance sheet,
which is the sum of a company’s assets minus liabilities.
 Solvency Ratios &
Statutory Report
Kinza Arzoo
Roll no: 18221554-045
 Solvency Ratios
• Assets minus liabilities is the quickest way to assess a
company’s solvency. The solvency ratio calculates net
income + depreciation and amortization / total
liabilities. This ratio is commonly used first when
building out a solvency analysis.
• There are also other ratios that can help to more
deeply analyse a company's solvency. The interest
coverage ratio divides operating income by interest
expense to show a company's ability to pay the
interest on its debt.
 Solvency Ratio

• Other ratios that may be analysed when considering

solvency include:
• Debt to equity
• Debt to capital
• Debt to tangible net worth
• Total liabilities to equity
• Total assets to equity
• Debt to EBITDA
 Statutory Report
• The statutory report is a report that a company or
organization ought to formulate public by law,
particularly its financial report.
• The statutory meeting must be held within a period of
not less than one month and not more than six
months after the date on which it is authorized to
commence its business.
• It is the mandatory submission of financial and non-
financial information to a government agency.
 Contents of Statutory Report

• Contents of a statutory report are generally specified in the

Companies Act. According to the Companies Act – 1994, a
statutory report shall state the followings:
• Number Of Shares Allotted Other Than Cash
• Summary of cash receipts and payments
• Amount of preliminary expenses
• Particulars of management
• Underwriting contract
• Details of commission paid
• Certificate of auditors
Thank You