What Would You Like to See in the Auditor's Report

What Do You Want to See in the Audit Report?

The purpose of an auditor’s report on financial statements is to provide a professional opinion on the fairness of the presentation of information contained in the financial statements. In the auditor’s report, auditors typically express one of four opinions regarding an entity’s financial statements. The opinions are usually expressed as unqualified, qualified, adverse, or disclaimer. An unqualified opinion means that the auditor concluded that an entity’s financial statements were prepared in accordance with generally accepted accounting principles (GAAP) and that no material misstatements exist. A qualified opinion means that a limitation of scope existed or that there was a slight departure from GAAP. An adverse opinion means the auditor feels the financial statements are materially misstated and do not conform with GAAP. A disclaimer of opinion usually means that the auditor could not form an opinion.

The audit report contains language referring to the auditing standards by which audits are conducted and general requirements of those standards regarding planning and performing auditing procedures. The audit report clearly indicates that the entity’s management is responsible for the production of the financial statements and that it is the responsibility of the auditors to express an opinion regarding these financial statements. In recent months, the Public Company Accounting Oversight Board (PCAOB) issued press releases discussing potential changes to the auditor’s report. Interested parties were encouraged to express their opinions about the usefulness of the current auditor’s report and recommend any wanted changes. In my opinion, the current auditor’s reporting model is effective in communicating the purpose of an audit, and providing the necessary information to help financial statement users understand how an audit opinion is reached.

Some people believe that information regarding how the...