As an entity, your company's lifeline will always primarily be your finances. More often than not, your growth strategies, decisions and even operational capacity will all depend on your ability to finance each venture. Because of this, companies must make an active effort to maintain timely and accurate financial records. However, how can a company verify whether or not the financial statements they have prepared are true?
This is where an auditor’s report comes in. Think of an audit report as a document that evaluates a company's financial proceedings, stating the validity and reliability of your financial statement and whether or not it can be used by your regulatory body to check your compliance as well as whether it can be used by potential investors, partners and/or stakeholders to assess your finances.
So, how is an auditor’s report prepared? What are its elements? Let's dive into the specifics – the content of audit reports and what they mean for your company.
To understand audit reports, you first need to understand what financial statements are. In a nutshell, financial statements provide a brief overview of your financial performance and cash flow during a specific period. They contain your:
These statements act as the foundation of your auditor as they conduct the audit proper and in creating their report. The auditor assesses your financial statements to see if you are complying with the relevant accounting standards based on your industry and locality --- with the two most common being the Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS).
Now that we know the role of financial statements in your company's audit, the next question is: who conducts the audit?
An auditor is the person who can vouch for the accuracy of your financial reports. This is why small business auditing is vital for your business. Auditors can be either internal or external; the former being employees or contractors working for the company they are auditing, and the latter mainly working for government agencies. It is advisable that auditors state their connection with the company (internal or external) so that the report will not be compromised.
Like all financial and accounting documents, an auditor’s report should adhere to the established standards of a local governing body. It could be based on the standards of the Generally Accepted Accounting Principles (GAAP), for example, to ensure that the auditor’s evaluation of accuracy is based on standard accounting practices.
In audit reports, there are also rules on the order of elements:
Auditors come in two forms:
Because independence is key in audits, external auditors are generally preferred when financial statements are submitted to external entities. In fact, it is considered best practice for auditors to declare their relationship with the business being audited to ensure credibility and transparency.
We now go to the audit report itself. Much like a financial statement, your audit report shows whether your finances accurately represent your company's operational and business proceedings and overall financial condition. When creating an audit report, the goal of the auditor is to provide an unbiased opinion on whether your financial reports are free from material misstatements, whether due to fraud or error.
Audits are particularly valuable to external stakeholders (such as investors, regulatory authorities, and financial institutions) who rely on them to make informed decisions. Internally, audits also help business owners and management assess risk, improve financial controls, and identify inefficiencies.
Given that your audit report stands as the structured document that gives its readers a firm understanding of your financial position, it holds several key sections to help stakeholders, regulatory bodies and even your management team easily understand where you are.
Note: While the structure may vary slightly depending on a company's location, industry and its applicable regulatory bodies, most audit reports include the following elements:
By following this set structure, the audit report ensures clarity, accountability, and consistency.
An auditor’s report is also known as an opinion. It has different natures depending on findings. There are four types of opinions expected when seeking professional corporate auditor support, such as:
An Unqualified/Clean Opinion is given when the financial reports are accurate. This is issued when the company’s position, operations, disclosures, and financial condition are fairly represented in the financial statement. It also states that the report has been made in accordance with GAAP and adheres to relevant statutory requirements and regulations.
A Qualified Opinion, despite its name, is not entirely the opposite of an unqualified opinion. This type of opinion is given if the financial statement accurately reflects the company’s financial condition, but is not fully compliant with GAAP. The style of the report is the same as that of an unqualified one, with the exception of an additional paragraph stating the reason/s why it didn’t pass for an unqualified opinion.
Disclaimer of Opinion is given when the auditor is unable to make a complete and accurate report, and could therefore refuse to give any opinion. This may be the result of the following: 1) a conflict of interest for the auditor (e.g. the auditor not being independent), 2) imposed limitations by the client, resulting in insufficient auditing, and 3) the absence of mandatory financial records.
An Adverse Opinion simply means that the auditor has discovered discrepancies in the company’s financial statements. Avoid this result as much as possible as it would require you to redo your books. Moreover, it would also affect your company’s compliance reputation.
For you to have a good or unqualified opinion, you need to present credible financial statements, which in turn can give assurance to bankers, creditors, stockholders, government agencies, and other interested parties. By regularly auditing your finances and financial statements, you are positioning your company as credible within your industry – allowing you to attract more business and drive your company’s growth.
After getting the results of your audit, it becomes your company's responsibility to address the findings. Depending on the assessment of the auditor, here's what your next steps would look like according to each finding:
This result is the best-case scenario after your audit. It means you were able to successfully track your finances and that your financial statements are accurate, compliant, and fairly presented. With these results, you can:
A qualified opinion means that while your reports are mostly accurate, there may be a specific area or section that didn't meet the applicable accounting standards. When this happens, here's what you should do:
Now, getting this result calls for immediate action. When an auditor gives you a disclaimer of opinion, it means that they weren't able to complete their audit process because of missing information, limitations during the audit or other external blockage. Once you get a disclaimer of opinion, your company should:
The last possible result you can get is an adverse opinion. Once this happens, it means an auditor found just cause to state that your records show significant issues with your financial reporting. When this happens, here are your next steps:
Your audit findings don’t just highlight what is, they help shape what comes next and tell you your next steps as a company.
Overall, regularly auditing your company’s financial position (both internally and externally) is one of the best ways to open growth opportunities for the company.
Not only does it give you and your management team a clear picture of where you stand, it also provides a ready-made assessment you can present to investors, partners, and even clients. That kind of transparency helps build trust in your company, which can lead to a wider network, a growing client base, and even an expanded scope of services (if applicable).
The audit process doesn’t just exist for compliance; it exists to give credibility.
When you have accurate, timely, and well-documented financial statements backed by a trusted external audit, it becomes much easier to move your company forward. It allows you to easily apply for funding, take in investors and even enter into business agreements that can be beneficial for both you and your partner entity.
Alongside company growth, it also cements your credibility within your country and industry.
Accurate financial records strengthen your relationship with the applicable regulatory bodies, making sure your operations are in compliance with any relevant rules and regulations. This trust between you and these regulatory bodies ultimately makes it easier to scale up your operations as applying for permits, approvals and licenses would be easier if you are known as a company who is always compliant.
In short: audits help you stay sharp, accountable, and positioned for growth. The more consistent and transparent your financial practices are, the more opportunities become present – paving the way for your company's longevity and success.
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First Published on October 30, 2014 and Edited by Aly Tagamolila on August 12, 2025