Audit Theory and Practice

Running head: AUDIT THEORY AND PRACTICE
Audit Theory and Practice
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AUDIT THEORY AND PRACTICE
Introduction
An audit report could be defined as the investigation of financial statements on the
part of an auditor acting as independent evaluator. After analysing the financial statements,
management accounts and other accounts or related reports for arriving at an inference
whether the business organisation has represented its performance in an unbiased and true
manner. Hence, reporting needs to be conducted by following appropriate auditing standards
prevalent in the nation. The current essay would emphasise on audit theory and practice
where the nature and the content of the audit report would be discussed. An auditor needs to
be alert on the changes of the accounting standard, as they bear the accountability of
incorporating changes into their reporting process. Finally, this report would include
identification of impact of the amended audit standard, which is the “International Standards
on Auditing (ISA) UK”.
Nature of audit reports:
Audit reports generally contain the following types of audit opinions:
Qualified opinion:
An opinion provided in a qualified audit report is identical to an unqualified opinion;
however, it is not possible for the auditing body to provide an unqualified opinion owing to a
number of reasons. One such reason might be that the auditor does not have considerable
evidence that the organisation has not prepared its financial statements by following IFRS;
however, the degree of impact is low (Tsipouridou and Spathis 2014).
Unqualified opinion:

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AUDIT THEORY AND PRACTICE
The unqualified opinion refers to the best possible outcome of audit. This indicates
towards two best possible opinions (Suwanda 2015). This means the auditor finds the report,
which confirms to IFRS and these are mentioned as follows:
1. The representation of the financial statements is made by fully adhering to the
principles laid down in UK IFRS
2. The information disclosed in the financial statements is true and fair.
Adverse opinion:
An auditor provides an adverse opinion when the probable impact of a disagreement
with management is so pervasive and material to the financial statements that the auditor
infers that a qualification of the audit report is not sufficient in disclosing the incomplete
nature of the financial statements. This has been identified as the adverse opinion of the
auditor, as the audited statements are not complying with norms mentioned in IFRS (Newton
et al. 2015).
Disclaimer opinion:
This type of opinion is issued by the auditors at the time they are unable to provide a
complete opinion. The reason might be due to lack of adequately maintained financial records
or there is lack of support from the management. For example, an auditor might not have the
chance of fulfilling tasks vital to the audit process like observation of operating procedures or
review of specific procedures.
Contents of the audit report
 Title of report
 Address
 Scope