The auditor expresses its audit opinions on their auditor report independently. Basically, they would assess your accounts and financial statements then tell you if your accounts are reliable. If not, they will highlight what are the issues in their report. Then you decide if you would like to rely on the company accounts.
Report to shareholders
Largely, your auditor is responsible to report to the shareholders of your company financial affairs. Broadly, the audit report would include as to whether your company accounts have been prepared in accordance with the Companies Act. This extends to the application of the relevant accounting standards consistently.
True and fair view
Your auditor must also report as to whether your company accounts give a true and fair view of the state of your company’s affairs.
In order for your auditor to form their views and conclusions of the state of your company’s affairs, they will carry out an examination of your accounting records on a test basis. This means your auditor will not check every transaction in your accounts.
Overall, they like to make sure that your company accounts are not materially misstated (incorrect). So that anyone looking at your company accounts will be able to obtain a fair view of the state of your company’s affairs. And that they will not be misled if they rely upon the figures in your accounts.
In addition, your auditor will also read your company’s policy for consistency with their knowledge of your company. For example, your accounting policy for stock. What method do you use? First in Last Out (FILO) or First in First Out (FIFO) and did you apply it consistently.
Qualified or unqualified auditor report
Your auditor will issue either a qualified audit report or an unqualified report. The unqualified report is desired. This means your company accounts are free from material errors. Thus, they are reliable.
Whereas a qualified audit report indicates that your Auditor is not happy with something included in your accounts and financial statements. This is not the audit report your many creditors and shareholders desired.
Qualified audit report could impact on your plan to list your company in the stock exchange. For example, a public limited company must have three years unqualified audit report consecutively on their accounts prior to admission. Therefore, this may prolong your admission process.