1. S21: Reporting

2. Audit Reporting » The main objective is to ensure clear and informative reporting to the users of financial statements. » Audit Reports should conform to the Reporting Standards of the CAG. » Audit Report on Financial (Attest) Audit is about expression of Auditor’s Opinion on the Financial Statements. The opinion is expressed in a prescribed format. » The present format certifies the accounts to be “Correct” in the case of Finance Accounts, and “True and Fair” in case of others (Govt companies, corporations, autonomous bodies etc.)

3. Opinion and basis of accounting » Properly presents i.e. correct- used when the financial statements have been prepared on a cash basis, reflecting the very low level of judgement required due to in preparing financial statements on a cash basis. » Presents fairly - used when the financial statements have been prepared on a partial accruals basis and are not intended to give a true and fair view. This form of words reflects the fact that though some element of judgement has been used in preparing the financial statements, the audit opinion is distinct one on accounts which give a true and fair view. » Presents true and fair view - used when the financial statements have been prepared on a full accruals basis and intended to give a true and fair view.

4. Format of Audit certificate » Normally, the audit reports on completion of financial audit will be in the form of audit certificates. » However, in appropriate cases, a detailed report can be annexed to the audit certificate. » In case the format of audit certificate is prescribed under the provisions of any law or engagement, such prescribed format shall be used.

5. Audit opinion » The audit opinion will also contain separate sections dealing with: » respective responsibilities of the executive and auditors » the basis of the opinion expressed » the opinion on the financial statements.

6. Basis of Opinion » The audit certificate should include a statement expressly setting out the basis of the audit opinion. This will include: » a statement certifying that the auditor has performed his examination in accordance with relevant legislative authority - where there is a legal requirement for him to certify; » a statement as to compliance or otherwise with Auditing Standards, together with the reasons for any departure therefrom; » a statement that the audit process includes examining, on a test basis, evidence relevant to the amounts, disclosures and regularity of transactions included in the financial statements; and » a statement that the audit is planned and performed so as to obtain reasonable assurance that the financial statements are free from material misstatement.

7. Expression of opinion » The audit certificates should contain a clear expression of opinion on both the truth and fairness/proper presentation/fair presentation (as appropriate) and the regularity of the transactions recorded in the financial statements. » ‘Truth’ refers to correctness of those matters capable of being determined with precision such as the balance of cash at bank etc. » The concept of ‘fairness’ is linked with a set of standards which provide a framework within which judgment can be exercised to report on the entity’s financial status in fairness.

8. Unqualified opinion n An unqualified opinion is given when, in the judgement of the Auditor, the financial statements properly present receipts and payments or give a true and fair view and have been prepared in accordance with relevant accounting requirements.

9. Qualified opinion- I » The audit opinion should be qualified where the Auditor is unable to satisfy himself that the financial statements are free from material misstatement whether caused by fraud, error or other irregularity. » E.g. For Appropriation Accounts a qualified opinion is also given on all Excess votes. » Three types of opinion can be given as qualfied opinions - ‘except for’, ‘adverse’ and ‘disclaimer of opinion’.

10. Types of Audit Opinion Type of opinion SignalInterpretation UnqualifiedFavourable True and fair view Except for Favourable with a qualification True and fair view, but for certain items AdverseUnfavourable Not true and fair, misleading Disclaimer of Opinion Neither favourable nor unfavourable Unable to express any opinion at all

11. Some important points about Certificate » The audit certificate should be positioned immediately before the financial statements and immediately after the statement of executive’s (directors' or management’s) responsibilities. » The Auditor should not sign the certificate and/or express audit opinion until the financial statements and all other financial information contained in a report of which the audited financial statements form a part have been approved by the accounting officer, board, or equivalent persons and he has considered all necessary available evidence. » The date of a certificate on financial statements is the date on which the auditor signs the report expressing his opinion on those statements.

12. Management Letter -I » In addition to expressing an opinion on the financial statements, the auditor but issues a Management Letter to the auditee for improving their financial management and controls. » The recommendations to the auditee towards improvement in their financial management and controls would be auditor’s value addition in the overall financial management. » A Management Letter to the top management of the entity include audit findings other than those which have been considered material enough to be taken to the Audit Certificate.

13. Management Letter -II » The Management Letter is distinct from and does not replace the inspection reports issued after the completion of transaction audit. » Audit must ensure that nothing communicated to the auditee entity is inconsistent with the audit opinion. » If audit considers that the audit certificate should be qualified or should include an explanatory paragraph, a report to management cannot be regarded as a substitute. » Omitting a significant comment on the basis of contemplated corrective action is not acceptable.