An audit report is the formal opinion of audit findings.

1. Eelo University Faculty
of Management
science
AUDIT REPORT
Principles of Auditing
Chapter - 6
© Buyera Saidi – Senior lecturer – Eelo University

2. What is an audit report ?
The audit report is the end product/result
of an audit and can be used by the
recipient person or organization as a tool
for financial reporting, investing, altering
operations, enforcing accountability, or
making decisions.
An audit report is the formal opinion of
audit findings. An effective audit report is
essential to making sure the results of your
audit are presented in a way that is useful
to the party receiving the audit.

3. © Buyera Saidi – Senior lecturer – Eelo University

4. UNMODIFIED/UNQUALIFIED OPINION:
Unmodified opinion is expressed to the financial
statements that prepared in all material respect and
complying with the applicable framework. This opinion is
issued once auditors obtain sufficient and appropriate
audit evidence to the financial statements as the result
of their testing. The auditor is not providing absolute
assurance on the financial statements that is why it uses
words “in all material respect”. All material respect here
means there is no material misstatement in the financial
statements, but there might be an immaterial
(something negligible/small) misstatement.
It is okay to have immaterial misstatement in the
financial statements as it is not lead users of FS to make
the wrong decision. To form an unmodified opinion, ISA
700 is the reference to follow.
© Buyera Saidi – Senior lecturer – Eelo University

5. QUALIFIED OPINION:
Qualified opinion is the type of modified audit opinion
where auditors make a conclusion after their testing
that there is material misstatement found in the
financial statements; however, those misstatements are
not pervasive. Pervasive here is a bit subjective as it is
based on auditor’s judgment.
But, as said in standard, misstatement is pervasive to
financial statements if those misstatements are not
effecting the financial statements and users’ decision
making. The auditor may issue a qualified opinion on
the opening balance of financial statements of the
previous year’s financial statements that were not
audited by them. In terms of seriousness, the qualified
audit opinion is serious than unqualified, yet it is better
than adverse and disclaimers.
© Buyera Saidi – Senior lecturer – Eelo University

6. ADVERSE OPINION:
The adverse opinion is issued to the financial statements
where auditors examined and concluded that those
financial statements are materially misstated and
pervasive. Adverse opinion is more serious than
unqualified and qualified.
This opinion is the message to users of financial
statements that they should not rely on these financial
statements in their decision making. This opinion is a bit
different from a qualified opinion. For a qualified
opinion, the auditor found material misstatement in the
financial statements, but those misstatements are not
pervasive. In Adverse opinion, misstatements are both
material and pervasive.
© Buyera Saidi – Senior lecturer – Eelo University

7. DISCLAIMER OF OPINION:
The auditor issues the disclaimer of opinion
where they could not obtain and unable to
access the audit evidence for individual items
or in aggregation in the to support their
testing.
Auditor believes that for those items that they
are not able to access and obtain information
could be materially misstated and pervasive.
© Buyera Saidi – Senior lecturer – Eelo University

8. AUDIT REPORT FORMAT
Audit Report Format is the standardized format
prescribed by the concerned authority using which
independent auditor as appointed by the company
in this regard, give its views and comments on the
company’s financial condition as well as internal
accounting after analysis the various documents of
the company.

9. The audit report format includes;
1. Title
2. Addressee
3. Introductory Paragraph
4. Management’s Responsibility
5. Auditor’s Responsibility
6. Opinion
7. Basis of the Opinion
8. Other Reporting Responsibility
9. Signature of the Auditor
10. Place of Signature
11. Date of Audit Report

10. 1 – TITLE
The title should mention –
‘Independent Auditor’s Report’.
The addressee should mention as to
whom the report is being presented.
2 – ADDRESSEE
© Buyera Saidi – Senior lecturer – Eelo University

11. 3
– INTRODUCTORY PARAGRAPH
A statement that the financial statements
described in the report have been audited.
4 – MANAGEMENT’S RESPONSIBILITY
Here the audit reports should mention the Management’s
Responsibility to the integrity of the financial statements
which gives an overview of the financial condition, cash
flows of the Company and financial performance. The
responsibility also includes the maintenance of accounting
records to prevent frauds. It is their responsibility to
formulate and execute necessary financial controls to ensure
the accuracy of the financial records. It should mention that
the financial statements are the responsibility of the
organization’s management. © Buyera Saidi – Senior lecturer – Eelo University

12. 5 – AUDITOR’S RESPONSIBILITY
The most important content in an Audit Report
is the Auditor’s Opinion. This mentions the
impression derived after auditing the financial
statements.
The Auditor responsibility is mentioned to show an
unbiased opinion on the financial statements and issue an
audit report. The report is based upon Standards on
Auditing. The Standards require that the auditor complies
with ethical requirements. It is the auditor’s responsibility
to plan and execute the audit to procure assurance
regarding the financial statements.
6 – OPINION
© Buyera Saidi – Senior lecturer – Eelo University

13. 7 – BASIS OF THE OPINION
The basis on which the opinion has been achieved
as reported. Facts of the basis should be
mentioned.
8 – OTHER REPORTING RESPONSIBILITY
Any other responsibility relating to reporting
exists, the same should be mentioned. This may
include Regulatory requirements.
9 – SIGNATURE OF THE AUDITOR
The Auditor needs to sign the audit report thereby
confirming the authenticity of the report.
© Buyera Saidi – Senior lecturer – Eelo University

14. 10 – PLACE OF SIGNATURE
The name of the city in which the
report is signed.
11 – DATE OF AUDIT REPORT
The date on which the audit report is
signed/reported.
Audit Report
Example - Next slides

15. Independent Auditor’s Report
To the Members of inftin Company
Report on the Financial Statements
We have audited the accompanying consolidated
balance sheets of Inftin Company as of December 31,
2019, and the related statements of income,
comprehensive income, retained earnings, changes in
stockholders’ equity and cash flows for the year then
ended, and a synopsis of the accounting policies and
other information. We also have audited the Firm’s
internal control over financial reporting as of December
31, 2019.
© Buyera Saidi – Senior lecturer – Eelo University

16. Management’s Responsibility for the
Financial Statements
These financial statements are the responsibility of
the Iftin’s management. The Iftin’s Board of
Directors is responsible for the matters with
respect to the preparation of these financial
statements that give a true and fair view of the
financial position, financial performance and cash
flows of the Firm in accordance with accounting
principles generally accepted in Somalia.
© Buyera Saidi – Senior lecturer – Eelo University

17. Auditor’s Responsibility
Our responsibility is to express an opinion based on
our audit on these financial statements. The audit
has been conducted in accordance with the auditing
standards generally accepted in Somalia. The
standards necessitate us to plan and perform the
audit to gain assurance on the authenticity of the
financial statements and to ensure that it is free
from any misstatements or possible frauds. The
audit includes inspection of the amounts and
disclosures in the financial statements. The audit
will provide a reasonable basis for our opinion.
© Buyera Saidi – Senior lecturer – Eelo University

18. Auditors opinion
In our opinion, the financial statements referred
to above present justly, the financial position of
Iftin Company as of December 31, 2019,
conforms to the accounting principles generally
accepted in Somalia. Also in our opinion, the Firm
maintained effective internal control over
financial reporting as of December 31, 2019.
Signature Place Date
Buyerasaidi Borama 31st /12/2019
© Buyera Saidi – Senior lecturer – Eelo University