The Purpose of an Audit Report

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In general financial statements represent a formal record of an entity’s performance over a certain period of time which contains useful information to shareholders to assist them in making decisions (IFRS, 2014). In recent years, a wide range of users including shareholders and investors are interested in financial statements such as competitors, lenders and so on. Hence the audit report is prepared to provide an independent examination and the expression of opinion on financial statements (Millichamp and Taylor, 2012). However whether the information that auditors faithfully present or the users can totally rely on might still be the big question. Nonetheless under rules and regulations set by accounting boards, audit reports show the external opinion on true and fair view of the company’s financial statements and reduce the “Audit Expectation Gap” (AEG).

Different users have different purposes when using audited financial statements (Millichamp and Taylor, 2012). IASSB chairman Arnold Schiller also argued that a quality and informative audit report is the one that delivers value to the entities’ stakeholders not just shareholders (2012). For example, the audited reports might give shareholders a picture of how profitable company is to see the potential growth and safety of their investment or lenders such as banks would be interested in the level of debt within a company and evidence that loans would be able to be repaid. Management is interested in analysing statements to measure the effectiveness of its policies and decisions, as well as government which would also be interested in determining the tax liability. Many people would prefer to use statements that have already been certified to make their decision due to the ass...

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...Objective Look at the Value of the Audit Report [online] available at: http://www.trueandfair.org.uk/questions-answers
(Accessed on 18th Feb 2014)

IFRS (2014) Financial Statements Presentation [online] available at: http://www.ifrs.org/Current-Projects/IASB-Projects/Financial-Statement-Presentation/Pages/Financial-Statement-Presentation.aspx (Accessed on 13th Feb 2014)

IFRS (2012) IFRS Outlook: Insights of IFRS for Executives and Audit Committees [online] available at: http://www.ey.com/Publication/vwLUAssets/Outlook_September2012/$FILE/Outlook_September2012.pdf (Accessed on 20th Feb 2014)

Millichamp, H., and Taylor, J (2012) Auditing 10th ed. London: Cengage Learning EMEA.

The CPA Journal (2014) Accounting and Auditing: The External Confirmation Process [online] available at: http://viewer.zmags.com/publication/56adc02d#/56adc02d/44
(Accessed on 16th Feb 2014)

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