Audits are formal reviews of a company’s business or financial operations. This process helps business stakeholders learn about the company’s financial health and operating activities. Public accounting firms generally conduct the company’s audit and release the official report on the audit findings. Four types of audit reports are common: unqualified, qualified, disclaimer and adverse. These reports indicate no issues are present, a material uncertainty exists, the auditor notes he did not fully audit the company and the auditor believes the company has significant financial issues, respectively. All reports follow a standard reporting process.
Prepare a report listing all issues found during the audit. This list is an unofficial audit report as it contains more information than traditional reports. Each material item will often have a reason or description of the violation.
Meet with the company’s management team. This meeting is the final stage of the audit process. Auditors will discuss the findings and seek any follow-up or feedback from owners and managers.
Write the final audit report. After discussing all of the issues with company management, the auditors will write the audit opinion. This includes an opening paragraph, note on the audit’s scope, any issues found and final auditor opinion.
The company is often responsible for discussing the audit report with stakeholders and releasing any information relating to the report. The auditor’s opinion should be a simple statement on issues found. Attempting to provide more information than necessary can violate the confidentiality agreement with clients.
Failing to conduct a proper audit and releasing an unqualified opinion can result in the auditor being held liable for false or misleading information. The general public and other organizations heavily rely on third-party audit reports. Auditors who do not conduct proper audits can create undue influence through their approval of a company’s improper accounting activity.
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