Audited financial statements refer to a complete set of general-purpose financial statements, including the related notes. The related notes ordinarily comprise a summary of significant accounting policies and other explanatory information and any other information required to be included as part of the financial statements by the laws and regulations governing the entity.
The requirements of the applicable financial reporting framework determine the form and content of the financial statements, and what constitutes a complete set of audited financial statements.
Auditors Opinion on Audited Financial Statements
It is the auditors’ responsibility to form an opinion on whether the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework.
The auditor here shall conclude as to whether he has obtained reasonable assurance about whether the financial statements as a whole are free from any material misstatement, whether due to fraud or error. That conclusion shall take into account: -
- The audited financial statements adequately disclose the significant accounting policies selected and applied;
- The selected accounting policies applied by the management are consistent with the applicable financial reporting framework and are appropriate;
- The accounting estimates made by management are reasonable;
- The information presented in the audited financial statements is relevant, reliable, comparable, and understandable;
- The financial statements provide adequate disclosures to enable the intended users to understand the effect of material transactions and events on the information conveyed in the financial statements; and
- The terminology used in the audited financial statements, including the title of each financial statement, is appropriate.
Audited Financial Statements and Fair Presentation
When financial statements are prepared in accordance with a fair presentation framework, the evaluation required should also include whether the financial statements achieve fair presentation.
The evaluation as to whether the financial statements achieve fair presentation shall include consideration of:
- The comprehensive presentation, structure and content of the financial statements; and
- Do the audited financial statements’, including the related notes, represent the underlying transactions and events in a manner that achieves fair presentation?
Forming of Opinion on Audited Financial Statements
While framing an opinion on audited financial statements, the auditor shall express an unmodified opinion when he concludes that the Audited financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework.
But if in case, if the auditor concludes that
- On the audit evidence obtained, the financial statements as a whole are not free from material misstatement; or
- He is unable to obtain sufficient appropriate audit evidence to conclude that the audited financial statements as a whole are free from material misstatement, the auditor shall modify the opinion in the auditor’s report
Audited Financial Statements and Auditor’s report
The auditor’s report shall be in writing and shall have a title that clearly indicates that it is the report of an independent auditor. And shall be addressed, as appropriate, based on the circumstances of the engagement.
The audit report shall include the following sections : -
Section of Audit Report
Auditor's Opinion section
- Identify the entity whose financial statements have been audited.
- Mention that the financial statements have been audited.
- Shall identify the title of each statement comprising the financial statements.
- Make a reference to the notes, including the summary of significant accounting policies.
- Mark the date of, or the period covered by, each financial statement comprising the Audited financial statements.
Basis for opinion
- States that the audit was conducted in accordance with standards on auditing.
- Shall make a reference to the section of the auditor’s report that describes the auditor’s responsibilities.
- Includes a statement that the auditor is independent of the entity in accordance with the relevant ethical requirements relating to the audit, and has fulfilled the other ethical responsibilities in accordance with these requirements.
- Make a statement as to whether the auditor believes that the audit evidence, he has obtained is sufficient and appropriate to provide a basis for forming an opinion.
Key audit matters
For audits of complete sets of general purpose financial statements of listed entities, the auditor shall communicate key audit matters in his audit report.
Responsibility of management for audited financial statements
- To prepare the financial statements in accordance with the applicable financial reporting framework, and for such internal control as management determines is necessary to enable the preparation of financial statements does not carry any material misstatement, whether due to fraud or error; and
- To assess the entity’s ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate as well as disclosed, if applicable.
Auditor’s Responsibility for Audit of Financial Statements
This section of the auditor’s report shall :
- State that the responsibilities of the auditor:
- Arrive at a reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error; and
- To issue an audit report that includes the auditor’s opinion.
- Mention that reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with Standards on auditing will always detect a material misstatement when it exists; and
- Mention that misstatements can arise from fraud or error, and either : -
- Represent that they are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements; or
- Establish a definition or description of materiality in accordance with the applicable financial reporting framework.
Signature, Place and Date of Auditor
Signature of Auditor
The auditor’s report shall be signed. The report is signed by the auditor (i.e. the engagement partner) in his personal name. Where a partnership firm is appointed as the auditor, the report is signed in the personal name of the auditor and in the name of the audit firm. The partner/proprietor signing the audit report also needs to mention the membership number assigned by the Institute of Chartered Accountants of India.
Place of Signature
The audit report shall name a specific location, which is ordinarily the city where the audit report is signed.
Date of Auditor's Report
The audit report shall be affixed with a date no earlier than the date on which the auditor has obtained sufficient appropriate audit evidence on which to base the auditor’s opinion on the financial statements, including evidence that : -
- The financial statements, including the related notes, have been prepared; and
- Those with the recognized authority have asserted that they have taken responsibility for those financial statements.