Understanding the Audit Report and Opinion

Election of the Audit Opinion: Audit Report

Definition and Standards to be Followed

The Audit Report on Annual Accounts is a commercial document that shows the extent of the work and the professional opinion of the auditor on them. In its preparation, the following technical standards must be met:

• First: It is presented according to Generally Accepted Accounting Principles (GAAP).
• Second: If they have been applied uniformly.
• Third: If the financial statements express, in all material respects, fairly the assets, liabilities, financial position and results, and the resources obtained and applied.
• Fourth: The auditor will express an opinion and the reasons that support it, if applicable, or the claim that they cannot express it and the causes that prevent it.
• Fifth: If the accounting information of the Management Report is consistent with the audited Annual Accounts.

Basic Elements of the Audit Report

• a) Title or Identification of the Report
  "Independent Auditor's Report on the Accounts"
• b) Addressee
• c) Identification of the Audited Entity
• d) Regulation of Audit Scope
  • a) Identification of documents to audit
  • b) A reference to technical standards.
  • c) Audit procedures that could not be applied because of limitations on the scope.
• e) Regulation of Opinion
  Opinion on whether the annual accounts express the true and fair view, in accordance with GAAP, consistently applied.
• f) Regulation of Qualifications
  Intermediate paragraph (between the scope and opinion paragraphs) which explains the reasons for an opinion that is "not clean."
• g) Regulation of "Emphasis"
  Exceptionally, the auditor believes it is important to highlight some significant aspect of the financial statements contained in the report.
  This does not imply any qualification in their report.
  In the opinion paragraph, there will not be any reference to this paragraph for emphasis.
• h) Regulation on the Management Report
  The auditor checks that the accounting information contained is in line with the Annual Accounts.
• i) Name, Address, and Registration Details of the Auditor
• j) Signature of Auditor
• k) Date of the Report
  The date of the report is the date of issue.
  It is, in turn, the completion of work.
  Possible double-date: the date of issuance of the report and the subsequent fact known between the issuance and delivery or between delivery and the shareholders' meeting.

Types of Opinion

• Favorable
• With caveats
• Unfavorable
• Denied

Circumstances with Potential Impact on the Opinion

• Limitation of the scope
• Error or failure to comply with GAAP
• Uncertainty
• Change in accounting principles and standards applied (uniformity)