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Audit Report Examples

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Audit Report Example of Facebook

Below is the auditor report example for Facebook, which is a U.S company, so it should be compliant with GAAP rules. This report has been taken from the Facebook annual report for 2018. Auditor for Facebook is Ernest &Young.

It has provided its audit report in 5 points which have been mentioned below:

#1 - Opinion on the Financial Statements

In the first paragraph, the auditor has indicated they have an audited balance sheet, Income Statement, Shareholder’s Equity, and Cashflow Statement of the company for the last 3 years. Also, they have checked all the related notes, which explain the basis for the numbers and some accounting guidelines. Based on the audit, EY is confirming that financials are in accordance with GAAP (Generally Accepted Accounting Principles) standards. Based on the report, they have provided an unqualified clean opinion; it means the auditor is satisfied with the financials provided.

#2 - A Basis for Opinion on Financial Statements:

In this part, the auditor mentioned that in their audit, they check to see any error, misrepresentation, or fraud in the data provided. They have taken some test cases to check the amounts that are provided in the financial. Also, they have tested the accounting principles which was used by management.

#3 - Opinion on Internal Control Over Financial Reporting

In this part, an auditor has checked whether the company is having control over its finances as regulated by COSCO (Committee of Sponsoring Organization) and PCAOB (Public Company Accounting Oversight Board). E.Y. has audited Income Statement, Balance Sheet, Cash Flow, and Shareholder’s Equity for this purpose.

#4 - The Casis for Opinion:

Here auditor mentioned their process for forming the opinion. They have mentioned that formally audit has been done to confirm whether the control mentioned by management over the financial are reasonable.

#5 - Definition and Limitation of Internal Control Over Financial Reporting:

Here the auditor tells about the procedures which can be used for internal control such as “provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,” etc. Because of some limitations, there can be cases that, even after adequate internal control, there can be some misstatements. Auditor has also mentioned the same in this report.

Audit Report Example of Tesco Plc

Tesco is a multinational grocery company in the U.K. It is the third-largest retailer in the world by revenue. Below is the snippet of the auditor report for FY 18, which has been prepared by Deloitte. If we compare from the auditor report example for Facebook, which has been mentioned above, the audit report example for Tesco seems to be more elaborative and larger in size and nature.

Below are some main parts of the sample audit report.

Opinion: As per Deloitte, their financial statements and basis for statements are as per IFRS (International Financial Reporting Standards). For their auditing, they have selected Group Income Statement, Group Statement of Comprehensive Income, Group and Parent Company Balance Sheet, Statement of Change in equity, Cash flow statement, and related notes.

The basis for Opinion: In this part, auditors mentioned that conducted audit is in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable laws.

Summary of audit approach: In this part, at first auditor specified the critical matters for audit which are-

Store impairment review;
Recognition of commercial income;
Inventory valuation;
Pension obligation valuation;
Contingent liabilities;
Presentation of the Group’s income statement;
Retail technology environment, including IT security, and formed their opinion on the above matters. Also, they provided their scoping of the audit.

Conclusions relating to going concerned: In this part, Auditors have reviewed the statements that have provided by the Directors of the company as we know that an organization is meant to be a going concern. So, auditors are checking here whether the directors have used the accounting standard, keeping in mind that the company is a going concern. Also, auditors have checked the uncertainties and the company’s ability to continue for at least the next 12 months forward. As per Deloitte, they have nothing to add or draw attention related to that.

Principal Risk and Viability Statement: In this portion, Deloitte mentioned their views on what kind of risks and statements are mentioned by directors and how they are being mitigated. Auditors have checked the statements of Directors that how the prospects of groups are assessed by them and for that what and how they have taken the time frame. Auditors also want to examine whether the Directors have an explanation of how the liabilities of companies will be met by the firm in the future. Auditors want the Directors to disclose any such liabilities, which can have an issue in the future. Based on that, they prepare a report. Deloitte confirms that they have nothing material to report.

Conclusion

Above, we have taken an audit report sample example of one US company that is compliant as per GAAP and one UK company, which is as per IFRS compliant. Though the principal of both the reports is the same, the report for UK company is showing elaborative information and providing an explanation of all the critical audit matters, which should be quite helpful in making an independent view of the firm by an analyst.