Contents of audit report

Contents of Audit Report and its sample format

Contents of Audit report:

In this blog, we have discussed the basic contents of an audit report along with a sample format.

While conducting an audit, every auditor has to go through three stages: 1) Preliminary work for his audit, 2) Execution of actual audit, and 3) Conclusion of the audit by means of submission of an audit report.

Thus, an audit report is the ultimate and final outcome of every audit exercise.

It is nothing but a statement that combines all the observations made by an auditor while reviewing a company’s financial statements. Through the medium of an audit report, an auditor accumulates the results of his audit and conveys his opinion on the financial statements of the client. Thus, it’s an indispensable part of audit without which the auditing process can’t complete.

What are the Contents of an Audit Report?

The following are the basic contents or elements of an audit report:

1. Title:

The auditor’s report should have an appropriate title, such as “Auditor’s Report” so that readers can easily identify and distinguish it from other reports like reports of the Board of Directors or internal reports.

2. Addressee:

The audit report should be addressed to an appropriate addressee.

An audit report is addressed to the company’s members and is considered at the AGM of the company. It should be appropriately addressed as required by the engagement letter and legal requirements. Mostly, it is addressed to the appointing authority of the auditor. In the case of statutory audit, it is addressed to the shareholders, and in the case of internal Audit to the Board.

3. Opening paragraph or Introductory paragraph:

In the opening paragraph, the audit report must give a proper reference to the financial statements that have been audited, the name of the entity, the period under review, etc. The report must clearly identify the financial statements including trading & profit and loss account, balance sheet, cash flow statement, & Statement of changes in equity.

The report should also include a statement specifying that the financial statements are the responsibility of the entity’s management and a statement stating that the auditor’s job is to merely offer an opinion on the financial statements based on the conduct of the audit.

4. Scope paragraph:

The audit report should briefly discuss the scope of the audit.

A reference should be made to auditing standards to indicate that appropriate auditing standards or practices were followed in conducting the audit. It gives an assurance that the audit has been conducted as per set standards.

The report must include a statement to the effect that the audit was planned and carried out in order to obtain reasonable assurance that the Financial Statements are free from material misstatements.

The audit report should state that the process of audit has included:

  • Examination of evidence, on a test basis, to support the amounts and disclosures in Financial Statements
  • Assessment of accounting principles used by the company in the preparation of its Financial Statements
  • Examination of significant estimates made by management
  • Evaluating the overall financial position of the company

The auditor should also state in his report that the audit provides a reasonable basis for his opinion, i.e., he has obtained sufficient & appropriate audit evidence that forms a reasonable basis for the expression of his opinion. But where he is unable to obtain sufficient evidence, he may issue a disclaimer of opinion.

5. Opinion paragraph:

The Opinion paragraph should contain the auditor’s opinion on the entity’s financial position and the results of its operations. He should state in the report whether the client’s records truly reflect its state of affairs or not, whether any discrepancies are found in the books, and whether proper policies are followed as per applicable accounting standards, rules, and regulations. He must also comment on the adequacy of disclosures made in financials.

6. The date of the report:

The date of the audit report is the date on which the auditor signs his report and expresses an opinion on the client’s financial statements.

However, this date cannot be earlier than the date on which the client’s financial statements are signed or approved by management.

7. Place of signature:

A reference should be made to the specific location, i.e., usually, the city in which the auditor signs the report.

8. Signature:

The audit report has to be signed by the auditor in his personal name. In the case where a firm is appointed as the company’s auditor, the report should be signed in the personal name of the auditor as well as in the name of the firm. The partner/proprietor signing it must mention his ICAI Membership Number.


In the case where the governing statute or law necessitates the auditor to include certain matters in his audit report or specifies the format in which the report should be issued, then such matters should be included in the report in addition to the requirements of SA 700. SA 700 which deals with “Forming an Opinion and Reporting on Financial Statements” describes the basic form and contents of the auditor’s report and has to be followed by all independent auditors to report on the accuracy of clients’ financials.

Types of audit report

An auditor’s opinion can fall into four categories:

Clean report:

When an auditor has no reservations or objections about the information of the client under audit, he gives an unqualified opinion. This is the most commonly seen type of audit opinion.

Adverse report:

An adverse opinion is a professional judgment expressed by an auditor that a company’s financial statements are misrepresented, misstated, and do not truly represent its financial performance and health. Adverse opinions are harmful to businesses because they imply misconduct or dishonest accounting practices.

Qualified report:

When neither an unqualified nor an adverse opinion is suitable, the auditor issues a qualified opinion. This happens when the auditor has some reservations about the client’s financial statements but they are not that significant so as to justify an adverse opinion.

Disclaimer of opinion:

The above three are opinions that an auditor expresses, however, ‘disclaimer of opinion’ is a situation when the auditor is not in a position to express his opinion. This could be due to the inability of the auditor to collect sufficient & appropriate audit evidence that enables him to draw his conclusion. This can also happen when the scope of the audit has been limited due to restrictions imposed by the management.

Significance of Opening Paragraph

As seen above under the head “Contents of Audit Report”, opinion paragraph is the initial part of any audit report.

The financial statements of the entity that have been audited are identified in the opening or introductory paragraph, together with the date and period covered by the financial statements.

The purpose of “Opening Paragraph” is to make readers of financial statements aware of the fact that the management of the client is in charge of preparing the accounts, whereas the auditor’s role is merely to provide an opinion on those accounts based on his audit.

The auditor communicates a basic message in the Opening Paragraph, which is that the preparation of financial statements requires management to make significant accounting estimates and judgments, as well as to determine the appropriate accounting principles and methods used in the preparation of such financial statements.

Significance of Scope Paragraph

The purpose of the “Scope Paragraph” is to inform users about the audit processes and procedures followed by the auditor in the conduct of his audit.

The auditor indicates in the Scope paragraph that the audit was planned and carried out in conformity with Auditing Standards commonly recognized in India and that the audit provides a reasonable basis for his opinion.

The Scope Paragraph is important because the auditor seeks to explain to the readers of his report about the scope of the audit. He does so by highlighting the nature and procedures of the audit. Test checking approach in audit as is used by the auditor in executing his audit work, as well as the crucial aspect of evaluating accounting principles and accounting estimates, are also clarified.

In addition, one of the basic aspects of auditing that the auditor only provides “reasonable assurance” and not “absolute assurance” is emphasized in the Scope Paragraph. Hence, it relates to the inherent limitations of an audit. The evidence and information gathered by an auditor can only give a reasonable basis for his opinion. It cannot give a 100% guarantee with regard to the correctness of books. This is because of limited time and resources available to the auditor, dependence on internal controls, etc.

A sample format

Given below is a sample format of an audit report giving an unqualified opinion:


(Appropriate Addressee)

We have audited the attached Balance Sheet of …… (Name of the entity) as at 31st March 2XXX and also the Profit and Loss Account for the year ended on that date annexed thereto. These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) In the case of the Balance Sheet, of the state of affairs of…….(Name of the entity) as at 31st March 2XXX; and

(b) In the case of the Profit and Loss Account, of the profit/loss for the year ended on that date.



(Date and Place)


[Source of specimen: ICSI module]

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