Definition of Auditor’s Report

An audit report may be defined as an organized

statement of facts relating to audit of books of account
of the company prepared after an inquiry and presented
to the shareholders.

It is the duty of an Auditor to make report to

shareholders. But it isn’t the duty of an Auditor to send
the report to each & every shareholder as decided in
the case “Allen Grlgh & Co. Ltd.(London, (1931)”
 According to Lancaster “A report is a
statement of collected and considered facts, so
drawn up to give clear and concise
information to persons who are not already in
possession of the full facts of the subject
matter of the report.”
 Importance of audit report

The importance of audit report can be

described from the two points views.

 From internal point of view

 From external point of view
Importance of internal users

 Implementation of future plan

 Knowing true and fear information

 Declaration of dividends

 Proper management

 Government donation
Importance of audit report to external users

 Reflecting actual financial position

 Help to future investors
 Tax Authority
 Help to invest
 Help to take loan
 Purchase of share
 Investigation
 Critical valuation
 Accurate data expression
 Professional advancement
 Basic elements of Audit Report

A measure of uniformity in the

form & content of the audit report is
desirable because it helps to promote
the readers understanding. The
auditor’s unqualified report will usually
consists of a paragraph describing the
scope of his audit & a separate
expressing his opinion.
 Title
 Address
 Identification of the financial statement
 A reference to the auditing standards.
 An expression or disclaimer of opinion on
the financial statements.
 Signature
 The auditors address &
 The date of the report.
Features of Audit Report
 Auditors’ report Of Sonali Bank Limited
For the year ended 31 December 2012

• To the Shareholders of Sonali Bank Limited

• We have audited the accompanying consolidated
financial statements of Sonali Bank Limited (SBL)
• and its subsidiaries (the “Group”) as well as the
financial statements of Sonali Bank Limited (“the
• Bank”) which comprise the Balance Sheet as at 31
December 2012 and Profit & Loss account,
• Statement of Changes in Equity and Cash Flow
Statement for the year then ended, and a summary
of significant accounting policies and other
explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of
these consolidated financial statements of the group and also the
financial statements of the Bank in accordance with Bangladesh
Financial Reporting Standards (BFRS), Bank Companies Act 1991, the
rules and regulations issued by the Bangladesh Bank, the Companies Act
1994, the Securities and Exchanges Rules 1987 and other applicable
laws and regulations. This responsibility includes; designing,
implementing and maintaining internal control relevant to the
preparation and fair presentation of financial statements that are free
from material misstatement, whether due to fraud or error; selecting
and applying appropriate accounting policies, and making accounting
estimates that are reasonable in the circumstances.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated
financial statements of the Group and the financial statements of the
Bank based on our audit. We conducted our audit in accordance with
Bangladesh Standards on Auditing (BSA). Those standards require that
we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements of the Group and the financial statements of the Bank are
free from material misstatements.
An audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The
procedures selected depend on our judgment, including the assessment
of the risks of material misstatement of the consolidated financial
statements of the Group and the financial statements of the Bank,
whether due to fraud or error. In making those risk assessments, we
consider internal control relevant to the entity’s preparation and fair
presentation of the consolidated financial statements of the Group and
the financial statements of the Bank in order to design audit procedures
appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements of the Group and the financial statements of the
Bank.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our audit opinion.
Basis for Qualified Opinion
1. Loans and Advances amounting to Tk. 9,383 million were found to be non-
performing as per Bangladesh Bank guidelines. In addition the base for provision was
found to be understated by overvaluing the collateral security of some bad loss parties
amounting to Tk. 2,169 million. Had provision been made on such non-performing
loans & advances, and the base for provision were properly calculated the loss for the
year would have been increased by Tk. 7,886 million.(Tk. 5,414 million on account of
additional provision, Tk. 303 million on account of transfer of interest income to
interest suspense, Tk. 2,169 million on account of additional provision for the
understated base for provision).
2. Interest receivable from Government against loan exemption under jute sector
reform project 94-95 is aggregated to Tk. 5,362 million. Neither any provision has
been kept nor has any amount so far received from the government since 1994-95.
Qualified Opinion
In our opinion, except for the effects of the matters
described in the Basis for Qualified Opinion
Paragraphs 1 to 2, the financial statements prepared
in accordance with Bangladesh Financial Reporting
Standards (BFRS), give a true and fair view of the
financial position of the Group as well as the Bank as
at 31 December 2012 and of the results of its financial
performance and its cash flows for the year then
ended and comply with the Bank Companies Act
1991, the rules and regulations issued by the
Bangladesh Bank, the Companies Act 1994, the
Securities and Exchanges Rules 1987 and other
applicable laws and regulations.
Emphasis of Matter
In addition to our above qualified opinion, we draw
attention to the following facts:
1. Note 7.9 to the financial statements stated that
some loans are not classified and no provision has
been provided due to High-Court Injunction.
2. Note 14 to the financial statements stated that
there is a shortfall of capital in compliance
with the requirements of BASEL II.
3. Note 7.10 to the financial statements stated that
Hotel Sheraton Corporate Branch and Gulshan
Corporate Branch distributed loans and advances
fraudulently to some parties contravening banking
rules and regulations.
We also report that:
(i) We have obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purpose of our
audit and made due verification thereof;
(ii) in our opinion, proper books of account as required by law have
been kept by SBL so far as it appeared from our examination of those
books and proper returns adequate for the purpose of our audit have
been received from (1140) branches not visited by us;
(iii) the consolidated balance sheet and consolidated profit and loss
account of the Group and those of the Bank together with the annexed
notes 1 to 48 dealt with by the report are in agreement with the books
of account and returns;
(iv) the expenditures incurred was for the purpose of the Group’s and
the Bank’s business;
(v) subject to matters described in basis for qualified opinion paragraphs
and emphasis of matter paragraph, the financial position as of 31
December 2012 and the loss for the year then ended have been
properly reflected in the financial statements and the financial
statements have been prepared in accordance with the Bangladesh
(vi) the financial statements have been drawn up in conformity with the Bank
Companies Act,1991 and in accordance with the accounting rules and regulations
issued by the Bangladesh Bank;
(vii) the consolidated financial statements of the Group and those of the Bank
conform to the prescribed standards set in the accounting regulations issued by the
Bangladesh Bank after consultation with the professional accounting bodies of
Bangladesh;
(viii) the records and statements submitted by the branches have been properly
maintained and consolidated in the financial statements;
(ix) subject to our audit findings numbered as 1 & 2 in the basis for qualified opinion
paragraphs, adequate provisions have been made for advances and other assets
which are, in our opinion, doubtful of recovery;
(x) the information and explanations required by us have been received and found
satisfactory;
(xi) the Bank has Two (2) overseas branches which has been audited by other auditors;
(xii) 80% of the risk- weighted assets have been audited covering 60 branches selected
by the bank authority based on their own risk assessment;
(xiii) we have spent approximately 14,400 man hours for the audit of the books and
accounts of the Bank.
Syful Shamsul Alam & Co.
Chartered Accountants
HodaVasi Chowdhury & Co.
Classification of Audit Report
The auditor expresses his opinion about
the financial information reported in annual
statements of accounts. His opinion may be

» Unqualified or clean report

» Qualified report
» Adverse report &
» Disclaimer report
 Unqualified Report
An unqualified opinion is issued when
the auditor is satisfied in all material
respects with the matters dealt with in
paragraph 29 of objective & basic
principles governing an audit as quoted in
paragraph 1. The auditors report should
express this satisfaction in a clear &
affirmative manner.
 Qualified Report
When the auditor is not satisfied
after auditing of the statement of the
company and if he believe that the
balance sheet of the company does not
reflect the actual financial position or if
he is not satisfied with some other causes
he things perfect, he can qualify report.
 Adverse Report
When an auditor gives his opinion
in a report describing that the
accuracy and the appropriate ness of
the accounts are not properly shown is
called adverse report.
 Disclaimer Report

Where there exits differences

between the opinion of the
auditor and authority then the
auditor reports that he is unable
to take the responsibility of audit,
then it is called report with
disclaimer.
 Audit Report of Company

• According to section 213 (2), (3), & (4)

the auditor’s report should contain the
following clause.

• 1st clause: Whether or not they have obtained

all the information & explanations which is the
best of their knowledge & belief were
necessary for the purpose of the audit (sec
213).
 2nd clause: Whether or not in their opinion
proper books of accounts as recquired
by the act have been kept by the
company sec 213(1).

 3rd clause: Whether or not in their opinion

the balancesheet & profit &loss account
have been drawn up in conformity with
the act & are in agreement with the
books of account.
 4th clause: whether or not in their opinion
and to the best of their information and
according to the explanation given to
them, the said accounts give the
information a recquired by the ordinance in
the manner so required and give a true and
fair view.

 5th clause: whether or not in their opinion:-

1. The expenditure incurred during the year was for
the purpose of a company business.
2. The business conducted, investments made &
expenditure incurred during the year were in
accordance with the objects of company.
 When to qualify an audit report:

Auditors must qualify the report

only if his non satisfaction in respect of
matters vital for his reporting is very
much great and the effect of
circumstances on profit or loss or
financial affairs of the company is
material.
In adequate provision for depreciation

In adequate provision made for bad and

doubtful debts.

Valuation of investment at cost when the

market price is far below it.

Contingent liability is not disclosed

Violation of provisions of company law-

payment of remuneration to managerial
personnel in excess of limit without
approval.
How to qualify the audit report

Clear & unambiguous

Conciseness.
Specific & to the point
Effect of matter
Misinterpretation.
 Definition of Audit Certificate
When the auditor signs a written document
in respect of the accuracy of the financial
statements or accounts or anything else of the
firm or the company it is called audit certificate.

Kamal Gupta-A certificate is a written

confirmation of the accuracy of the facts started
therein and does not involve any estimate or
opinion.

The certificate means that what it contains

is cent percent true and correct and it does not
include any inaccurate facts.
Audit Report vs. Audit Certificate

1.Means
2.Criticism
3.Scope
4.Suggestion
5.Time
6.Responsibility