Entity’s financial statements are normally audited annually by an independent audit firm as per management’s intention, the board’s requirement, and or by law.
Big four audit firms are the well-known auditors that provided audit services.
Basically, if auditor found no major issue on the financial statements they will issue the unqualified report.
Unqualified Audit Report issued by the auditor to financial statements when auditor found no material misstatements after their testing. This report contains the unqualified opinion from an independent auditor.
This basically means that the entity’s financial statements are prepared and presented by followed that accounting standards that they are using.
And the entity also applies the materiality concept correctly in presenting the financial information.
There are many other accounting standards that an entity might follow.
For example, US GAAP or IFRS. These two are the dominate in the accounting world now.
Yet, some countries required companies that operated in their countries to follow their accounting local accounting standards or we can say local GAAP.
Why unqualified report is important for an entity?
The Audit report is important for the entity to comply with the law and/or the requirement of the board of directors. And unqualified report even more important for the entity and especially for the management that running the entity.
This report proves that management integrity to owners or shareholders is maintained at an acceptable level.
The entity might need finance or financial services from the financial institution or more specifically from banks.
This report is normally needed by those entities. And it could speed up obtaining process and also increase bargaining power in the negotiation process.
Importance of information in the audit report:
The following is the key information in the audit report. This information covering corporate information, report of directors and other key management. Auditor’s opinion normally present right after management reports.
Right after the auditor’s opinion, five financial statements are listed ranging from balance sheet, income statement, statement of change in equity, statement of cash flow and the last one is The noted to financial statements.
These statements present financial information during the audit period.
Here is the list of those key reports:
- Corporate information
- Report of the directors
- Statement by Directors
- Report of the independence directors
- Statement of financial position
- Statement of profit or loss and other comprehensive income
- Statement of change in equity
- Statement of cash flow
- Noted to financial statements