MIRANDA, SHARMAINE C.

BSA-3A

Pre Test - Communication of Audit Results

1. What is an audit report?

Audit report, as recorded in the annual report, examines to check the compliance
of a company’s financial statements with GAAP. The audit report is also referred
as the clean opinion. An audit report may include three paragraphs; the first
stating the responsibilities of the auditor and directors; the second stating the use
of GAAP; and finally, the third paragraph stating the auditor’s opinion. An audit
report is, therefore, an official evaluation of an organization’s financial status, in
combination with the opinion of the auditor and collected data on the company’s
financial transactions and situation. This is a general process for companies it
uses while evaluating their records and providing financial info to present as well
as future investors.

2. What are the composition the an audit report?

First is known to be the Engagement Objective and Scope which enable internal
auditors to focus efforts on the significant risks in the area or process under
review, develop the engagement work program, and communicate clearly with
management and the board. Access the new supplemental guidance now.
Second is the Applicable conclusions, opinion or audit findings that are result of
auditor evaluations of the evidences obtain during the engagement based on the
effects of the observations and recommendations on the activities reviewed.
Audit opinion must take into account the expectation of senior management, the
board and other stakeholder and must be supported by sufficient, reliable,
relevant and useful information known as sufficient and appropriate evidence.
Third, is Recommendation refers to an internal audit activity report are designed
to help the organization achieve its goals which may relate to operations,
financial reporting or legal/regulatory compliance that may also suggest
approaches to correcting or enhancing performance as a guide for management
in achieving desired results. Lastly, Action plan or corrective action which contain
any information that management need to do concerning the audit findings.

3. What and explain the different type of audit opinion?

 Positive Assurance- This is the strongest type of opinion were the auditor is
taking a definite position on the strength of the internal controls and whether
risk mitigation process are adequate and effective but also that sufficient
evidence was gathered to be reasonably certain that evidence to the contrary,
if it exists, would have been identified. This type of opinion requires the highest
 level of evidence. Positive assurance provides the reader a high level of
confidence and comfort in the reliability of the underlying information.
 Negative Assurance- The statement that nothing has come to the attention of
the auditor that would indicate inadequate internal controls. In this opinion, the
auditor takes no responsibility for the sufficiency of the audit scope and
procedures to find all concerns or issues. In addition, this is of less value
compared to a positive assurance. A negative assurance opinion merely states
that the internal auditor has not seen problems based on the work performed.
 Qualified Opinion- This is applicable when specific findings are noted that
contradicts the overall opinion. This can be useful in situations where there is
an exception to the general opinion.
 Disclaimer of Opinion- This is where the internal audit activity does not
express any opinion.

4. Who disseminates the audit report?

The chief audit executive responsible to the parties who can ensure that the
results are given due consideration. If not otherwise mandated by legal,
statutory or regulatory requirements, prior releasing results to parties outside
the organization, it is stated that he must Assess the potential risk to the
organization, Consult with senior management and/or legal counsel if
appropriate and lastly Control dissemination by restricting the use of the result.