The auditor (an independent certified public accountant) is responsible for seeing that the financial statements issued comply with generally accepted accounting principles. In contrast, the company's management is responsible for the preparation of the financial statements. The auditor must agree that management's choice of accounting principles is appropriate and that any estimates are reasonable. The auditor also examines the company's accounting and internal control systems, confirms assets and liabilities, and generally tries to be sure that there are no material errors in the financial statements.
Though hired by the management, the auditor is supposed to be independent and to serve the stockholders and the other users of the financial statements.
An auditor's report (also called the auditor's opinion) is issued as part of a company's audited financial report. It tells the end-user the following:
An auditor's report is considered an essential tool when reporting financial information to end-users, particularly in business. Since many third-party users prefer or even require financial information to be certified by an independent external auditor, many auditees rely on auditor reports to certify their information in order to attract investors, obtain loans, and improve public appearance. Some have even stated that financial information without an auditor's report is "essentially worthless" for investing purposes.
The Types of Audit Reports
There are four common types of auditor's reports, each one representing a different situation encountered during the auditor's work. The four reports are as follows:
Auditor's Report on Internal Controls
Following the enactment of the Sarbanes-Oxley Act of 2002, the Public Company Accounting Oversight Board (PCAOB) was established in order to monitor, regulate, inspect, and discipline audit and public accounting firms of public companies. The PCAOB Auditing Standards No. 2 now requires auditors of public companies to include an additional disclosure in the opinion report regarding the auditee's internal controls, and to opine about the company's and auditor's assessment of the company's internal controls over financial reporting. These new requirements are commonly referred to as the COSO Opinion.
|cleopatraliao: unqualified>qualified>adverse>disclaimer :D|
|kahh: Who knows more on this COSO opinion?|
| vatsal92: Unqualified -> Clean report|
Qualified -> Exceptions to Accounting principles
Adverse -> Not fair presentation
Disclaimer -> Unable to express an opinion.
|LogicMan: what is "COSO"?|
|irapp92: COSO stands for the Comittee of Sponsoring Organizations of the treadway commission. They established a new system of internal control strategies for companies, thus planting the seed for new broadly accepted standards of internal reporting and control within public companies. A quick Google gives you all the info if you're interested|
|akhlo: Technically the auditors are hired by the board of directors, not management but whatever.|
|UcheSam: This phrase “Though hired by the managemen....” is not correct. In context, External Auditor is being spoken about here. External auditors are appointed and engaged by the shareholders mostly through audit committee.|