9/4/24, 11:10 PM Audit Report - Basics, Format and Content

Products

Get Guaranteed
On-Time Filing
by India’s Top Tax
Experts
Expert Guidance, Zero Errors,
Hire an Expert
Maximum Returns.

Index
HOME ACCOUNTS AND AUDIT ACCOUNTING STANDARDS AUDIT REPORT - BASICS, …

Audit Report - Basics, Format and Content

Updated on: Jun 15th, 2024 | 3 min read

For any enterprise, the audit report is a key deliverable which shows the end
results of the entire audit process. The users of financial statements like Investors,
Lenders, Customers, and others base their decisions and plans on audit reports of
any enterprise. An audit report is always critical to influencing the perceived value
of any financial statement’s audit.

The auditor should be careful in issuing the audit report as there is are a large
number of people placing reliance on such report and taking decisions
accordingly. The report should be issued by being unbiased and objective in
discharging the functions.

https://cleartax.in/s/audit-report 1/12
9/4/24, 11:10 PM Audit Report - Basics, Format and Content

NOTE: The threshold limit of Rs 1 crore for a tax audit is proposed to be increased
to Rs 5 crore with effect from AY 2021-22 (FY 2020-21) if the taxpayer’s cash
receipts are limited to 5% of the gross receipts or turnover, and if the taxpayer’s
cash payments are limited to 5% of the aggregate payments.

Say Hi to simplified multi- File Now

income tax filing! Use FIFTY50 for flat 50% Off

3-step, live assisted, e-filing with smart tax-saving nudges

on Cleartax

Contents of an Audit Report

The basic structure of an audit report as prescribed by the Standards on Auditing

is as follows:

Heading Brief of contents

Title should mention that it is an ‘Independent

Title
Auditor’s Report’.

Should mention clearly as to whom the report is being

given to. For example Members oMentions that it is
Addressee the Management’s responsibility to Prepare the
Financial Statements. f the company, Board of
Directors

Management’s
Responsibility for
Financial Statements

https://cleartax.in/s/audit-report 2/12
9/4/24, 11:10 PM Audit Report - Basics, Format and Content

Mention that responsibility of the Auditor is to express

Auditor’s Responsibility an unbiased opinion on the financial statements and
issue an audit report.

Should mention the overall impression obtained from

Opinion the audit of financial statements. For example
Modified Opinion, Unmodified Opinion

State the basis on which the opinion as reported has

Basis of the Opinion been achieved. Facts of the basis should be
mentioned.

If any other reporting responsibility exists, the same

Other Reporting
should be mentioned. For example Report on Legal or
Responsibility
Regulatory requirements

Signature of the The engagement partner (auditor) shall sign the audit
Auditor report.

Place of Signature The city in which audit report is signed.

Date of Audit Report Date on which the audit report is signed.

Other headings being basic and self-explanatory in nature, we need to

understand the about the opinion part precisely. This part forms the basic crux of
an audit report.

Opinion in an Audit Report

There are primarily two kinds of opinions issued by an auditor in his / her audit
report:

Unmodified Opinion (also called Unqualified report)

https://cleartax.in/s/audit-report 3/12
9/4/24, 11:10 PM Audit Report - Basics, Format and Content

Modified Opinion (also called Qualified report)

Unmodified Opinion

Issued for any audit where the auditor is satisfied that the financial statements
present a true and fair view of the operations and transactions in an enterprise
during the period. An audit report with an Unmodified Opinion is also known as a
‘Clean Report’. An Unmodified report develops confidence among users of
Financial statements and annual reports of an enterprise. It provides an
impression that the financial statements are reasonably free from any
misstatements and results as appearing there are true and fair.

Modified Opinion

Whenever the auditor has specific findings during his / her audit and concludes
that an Unmodified Opinion cannot be issued due to the nature of findings, a
Modified Opinion is issued in the audit report. There are two basic reasons due to
which an auditor concludes on issuing a Modified Opinion:

Based on the audit and evidence, finds out that the financial statements
contain a certain degree of material misstatements.

Unable to obtain sufficient and appropriate evidences to conclude that the

financial statements are free from material misstatements.

There are three kinds of modified opinions which are issued according to the
findings and circumstances:

Adverse Opinion

Qualified Opinion

Disclaimer of Opinion

Qualified Opinion

https://cleartax.in/s/audit-report 4/12
9/4/24, 11:10 PM Audit Report - Basics, Format and Content

A Qualified Opinion is given in a situation where:

The auditor concludes that misstatements are material but the impact is not
so high that it would render the whole financial statements unacceptable; or

The auditor is unable to obtain sufficient or appropriate audit evidence but

concludes that there are indications of misstatements in the financial
statements (but the degree is not high).

Example of a Qualified Opinion paragraph in audit report: In our opinion, except

for the incomplete disclosure of the information referred to in the Basis for
Qualified Opinion paragraph, the financial statements give the information
required by the Companies Act, 2013, in the manner so required and give a true
and fair view in conformity with the accounting principles generally accepted in
India:

In case of the Balance Sheet, of the state of affairs of the company as at

March 31, XXXX;

In case of Profit and Loss Account, of the profit/loss for the year ended on
that date; and

In case of the Cash Flow Statement, of the cash flows for the year ended on
that date.

Adverse Opinion

An Adverse opinion shall be issued by the auditor where he concludes that on the
basis of evidence obtained and procedures performed, there are material
misstatements in the financial statements and the impact of the same is high.

Example of a Qualified Opinion paragraph in audit report: In our opinion,

because of the omission of the information in the Basis for Adverse Opinion
paragraph, the financial statements do not give the information required by the
Companies Act, 2013, in the manner so required and also, do not give a true and
fair view in conformity with the accounting principles generally accepted in India:
https://cleartax.in/s/audit-report 5/12
9/4/24, 11:10 PM Audit Report - Basics, Format and Content

In case of the Balance Sheet, of the state of affairs of the company as at

March 31, XXXX;

In case of Profit and Loss Account, of the profit/loss for the year ended on
that date; and

In case of the Cash Flow Statement, of the cash flows for the year ended on
that date.

Disclaimer of Opinion

A Disclaimer of Opinion is to be issued by an auditor in cases where the auditor

concludes that he / she is not able to obtain sufficient and appropriate
evidences. In such scenario, the auditor is not able to form an opinion and thus,
disclaims form providing an opinion on the financial statements. The impact of
material misstatements and degree of the same is high enough.

Example of a Draft Disclaimer of Opinion: We were engaged to audit the financial

statements of ABC Private Limited (“the entity”) which comprises the Balance
Sheet as at March 31, XXXX, the statement of Profit and Loss, (the statement of
changes in equity) and statement of Cash Flows for the year then ended, and
notes to the financial statements, including a summary of significant accounting
policies. We do not express an opinion on the accompanying financial statements
of the entity. Because of the significance of the matters described in the Basis for
Disclaimer of Opinion section of our report, we have not been able to obtain
sufficient and appropriate audit evidence to provide a basis for an audit opinion
on these financial statements.

Say Hi to simplified multi- File Now

income tax filing! Use FIFTY50 for flat 50% Off

3-step, live assisted, e-filing with smart tax-saving nudges

on Cleartax

https://cleartax.in/s/audit-report 6/12
9/4/24, 11:10 PM Audit Report - Basics, Format and Content

Emphasis of Matter paragraph in an Audit Report

In a situation where the auditor concludes that it is important to draw the

attention of users of the financial statement to a particular reported item, he/she
may include an Emphasis of Matter paragraph in his / her audit report. In this
case, the auditor is not required to modify his / her opinion. The paragraph is
added when the issue is not a key audit matter and only requires disclosure for a
better understanding of the financial statements.

Example of circumstances where the auditor shall include Emphasis of Matter

paragraph in audit report:

To inform users of financial statements that the same has been prepared
under a special purpose framework;

The auditor discovers some facts after the date of an audit report and the
auditor issues new or amended audit report.

Uncertainty about the future outcome of an ongoing litigation.

Can't get yourself started on Get Cleartax

expertise now
taxes?
Get a Cleartax expert to handle all your tax filing start-to-
finish

BROWSE BY TOPICS

Income Tax e-Filing

Income Tax Slabs FY 2023-24

How To File ITR

Which ITR Should I File?

https://cleartax.in/s/audit-report 7/12
9/4/24, 11:10 PM Audit Report - Basics, Format and Content

Last Date To File ITR For 2023-24

Old vs New Tax Regime

Income Tax Refund

Capital Gains Income

Advance Tax

Income Tax Notice

TDS

Professional Tax

ITR U

NRI

HUF

Follow us on C O M PA N Y

About us
Contact us

Have a query? Careers

Media & Press
Support
User reviews

Engineering blog
Clear Library
FinTech glossary

ClearTax Chronicles
GST Product Guides
Trust & Safety

Cleartax(Saudi Arabia)

https://cleartax.in/s/audit-report 8/12
9/4/24, 11:10 PM Audit Report - Basics, Format and Content

PRODUCTS

Individuals Income Tax Filing

Income Tax e Filing Income Tax App android

Tax Planning Income Tax
ClearInvestment Secion 80 Deductions

ClearServices Income tax for NRI

Mutual Funds & ITR e-filing App
Mutual funds

ClearGST Enterprises

GST ClearGST
GST Login ClearE-Waybill

GST software e-Invoicing Software

New GST returns ClearTDS
e-invoicing eWay Bill Registration

Input tax credit

CAs SMEs

CA partner program ClearGST

ClearGST ClearOne
ClearTDS Billing Software
ClearTaxCloud Invoicing Software

ClearPro App Services for businesses

ClearOne App

ClearServices HSN Lookup

Tax filing for professionals HSN Code Finder

Tax filing for traders Cement HSN Code
Clear Launchpad Transport HSN Code

Trademark Registration Plastic HSN Code

Company Registration Cloth GST Rate
TDS returns Books GST Rate

MSME Registration

https://cleartax.in/s/audit-report 9/12
9/4/24, 11:10 PM Audit Report - Basics, Format and Content

RESOURCES & GUIDES

GST Resources ITR Resources

GST Registration Income Tax Slab

GST Returns Form 26AS

GST Procedure What is Form 16

GST News & Announcement Salary Income
GSTR 9 Annual Returns How to File TDS Returns

GST Payments & Refunds New Income Tax Portal

Invoicing Under GST Incometax.gov.in
GSTR-2B Income from Selling Shares

GSTR-3B Income Tax Due Dates

Mutual Fund Resources Business Resources

How to Invest in Mutual Funds Memorandum of Understanding (MoU)

Mutual fund Types Mudra Yojana

ELSS Inflation & Deflation
SIP Mutual Funds Loan Agreement

Hedge Funds Succession Certificate

Debt Funds Solvency Certificate
NFO Debt Settlement Agreement

What is AMFI Rental Agreement

What is NAV Letters Of Credit

TO O LS

Income tax calculator PPF Calculator

EMI Calculator GST number search

Mutual fund calculator IFSC Code Search

HSN Code Finder Generate rent receipts
SIP calculator Home Loan EMI Calculator

GST calculator NPS Calculator

HRA calculator Find HSN code

RD Calculator Tax Saving Calculator

https://cleartax.in/s/audit-report 10/12
9/4/24, 11:10 PM Audit Report - Basics, Format and Content

FD Calculator Get IT refund status

Gold Rates Today Salary Calculator
Currency Converter EPF Calculator

Compound Interest Calculator GST Number Search by Name

TRENDING MUTUAL FUNDS

ICICI Prudential Technology Fund Direct Plan Growth Tata Digital India Fund Direct Growth

Axis Bluechip Fund Growth ICICI Prudential Technology Fund Growth

Aditya Birla Sun Life Tax Relief 96 Growth

Aditya Birla Sun Life Digital India Fund Direct Plan Growth

Quant Tax Plan Growth Option Direct Plan SBI Technology Opportunities Fund Direct Growth

Axis Long Term Equity Fund Growth

TO P A M CS

SBI Mutual Fund Nippon India mutual fund HDFC Mutual Fund UTI mutual fund

Kotak Mahindra Mutual Fund ICICI Prudential Mutual Fund Aditya Birla Mutual Fund

Axis mutual fund

STO CK M A R K E TS

Stock Market Live Yes Bank Share Price SBI Share Price IRCTC Share Price

ITC Share Price TCS Share Price Tata Motors Share Price Infosys Share Price

Idea Share Price HDFC Bank Share Price

BEST FUNDS

Best Mutual Funds Best Tax Savings Mutual Funds Best Index Funds

Best Equity Mutual Funds

Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear
serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.
https://cleartax.in/s/audit-report 11/12
9/4/24, 11:10 PM Audit Report - Basics, Format and Content
Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get
your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital
gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our
Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps
CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes
tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in
getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can
get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

CLEARTAX IS A PRODUCT BY DEFMACRO SOFTWARE PVT. LTD.

Company Policy Terms of use

ISO 27001
Data Center

SSL Certified Site

128-bit encryption

https://cleartax.in/s/audit-report 12/12