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Audit Report - Meaning, Definition & Content


The audit report is the final stage of the audit process. The results of the audit are communicated through the audit report. An audit report is the written opinion of an auditor regarding companies financial statements. Audit report is a document prepared by an auditor to certify the financial position and accounting records of a firm.

Meaning of Audit Report

The audit report is the statement included in the financial statements. It contains the opinion of the auditor in financial statements. The auditor reports to the shareholders who have appointed him. He has to provide his opinion on the truth and fairness of financial statements. Thus, the auditor protects the interest of shareholders through an audit report.

Definition of Audit Report

Lancaster has defined a report as “a report is a statement of collected and considered facts, so drawn up as to give clear and concise information to persons who are not already in possession of the full facts of the subject matter of the report.”

According to Cambridge Business English Dictionary, the Audit report is defined as a formal document that states an auditor’s judgment of a company’s accounts.

---Under Sec. 143(3), the auditor of a company must report to its members.

(a) The accounts examined by him;

(b) Balance Sheet, Profit and Loss Account, and Cash Flow statement, which are laid in a general meeting of a company during his tenure of office; and

(c) The document declared to be attached to the Balance Sheet and Profit and Loss Account.

Content of audit report :

As per Sec. 143 of the Companies Act, the auditor’s report shall also state—

  1. whether he has sought and obtained all the information and explanations which to the best of his knowledge and belief were necessary for the purpose of his audit and if not, the details thereof and the effect of such information on the financial statements;
  2. whether, in his opinion, proper books of account as required by law have been kept by the company so far as appears from his examination of those books and proper returns adequate for the purposes of his audit have been received from branches not visited by him;
  3. whether the report on the accounts of any branch office of the company audited under sub-section (8) by a person other than the company’s auditor has been sent to him and the manner in which he has dealt with it in preparing his report;
  4. whether the company’s Balance Sheet and Profit and Loss account dealt with in the report are in agreement with the books of account and returns;
  5. whether, in his opinion, the financial statements comply with the Accounting Standards;
  6. the observations or comments of the auditors on financial transactions or matters which have any adverse effect on the functioning of the company;
  7. whether any director is disqualified from being appointed as a director under sub-section (2) of section 164;
  8. any qualification, reservation or adverse remark relating to the maintenance of accounts and other matters connected therewith;
  9. whether the company has an adequate internal financial control system in place and the operation ineffectiveness of such controls;
  10. such other matters as may be prescribed.
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