Immersing in audit

  Audit report is a document  obtained as a result of  an audit of financial statements and attached to the financial statements. This report is needed to convey the opinion expressed by the auditors to the shareholders (or other parties as required by the engagement) on whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework.  Matters to be considered when forming the audit opinion on the financial statements To form an opinion on whether the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting fram ework the auditor shall consider the following matters: ·        Whether sufficient appropriate audit evidence has been obtained. ·        Whether uncorrected misstatements are material, individually or in aggregate. ·       The qualitative aspects of the entity’s accounting practice, including indicators of possible bias in management’s judgments.

 

  Auditors express an audit opinion on the set of financial statements which comprises of the statement of financial position, the statement of comprehensive income, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including a summary of significant accounting policies for reporting year. Thus, the cash flow statement is also audited alongside other components of the financial statements. But unlike the statement of financial position and the statement of comprehensive income the auditors do not perform the tests of control and substantive procedures with respect to the statement of cash flows.

  The risks of material misstatement of financial statements may increase when expertise in a field other than accounting is needed for management to prepare the financial statements, for example, because there is some complexity, or because management may not possess knowledge of the field of expertise. Besides, if the preparation of the financial statements involves the use of expertise in a field other than accounting, the auditor, who is skilled in accounting and auditing, may also not possess the necessary expertise to audit those financial statements.

  Internal audit function Internal audit function is a function of an entity that performs assurance and consulting activities designed to evaluate and improve the effectiveness of the entity’s governance, risk management and internal control processes.