What Are the 4 Types of Audit Reports?

 Small Business

 Accounting & Bookkeeping

 Audit Reports

ByKJ HendersonUpdated March 07, 2019

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 What Happens to a Company If It Does Not Comply With Audit Report
Recommendations?
 What Is a Subsequent Event in Accounting?

An audit report is an appraisal of a small business’s complete financial status.

Completed by an independent accounting professional, this document covers a
company’s assets and liabilities, and presents the auditor’s educated assessment of
the firm’s financial position and future. Audit reports are required by law if a company
is publicly traded or in an industry regulated by the Securities and Exchange
Commission (SEC). Companies seeking funding, as well as those looking to improve
internal controls, also find this information valuable.

Tip

There are four types of audit reports: and unqualified opinion, a qualified opinion, and
adverse opinion, and a disclaimer of opinion. An unqualified or "clean" opinion is the
best type of report a business can get.

Unqualified Opinion
Often called a clean opinion, an unqualified opinion is an audit report that is issued
when an auditor determines that each of the financial records provided by the small
business is free of any misrepresentations. In addition, an unqualified opinion
indicates that the financial records have been maintained in accordance with the
standards known as Generally Accepted Accounting Principles (GAAP). This is the
best type of report a business can receive.

Typically, an unqualified report consists of a title that includes the word “independent.”
This is done to illustrate that it was prepared by an unbiased third party. The title is
followed by the main body. Made up of three paragraphs, the main body highlights the
responsibilities of the auditor, the purpose of the audit and the auditor’s findings. The
auditor signs and dates the document, including his address.

Qualified Opinion
In situations when a company’s financial records have not been maintained in
accordance with GAAP but no misrepresentations are identified, an auditor will issue
a qualified opinion. The writing of a qualified opinion is extremely similar to that of an
unqualified opinion. A qualified opinion, however, will include an additional paragraph
that highlights the reason why the audit report is not unqualified.

Adverse Opinion
The worst type of financial report that can be issued to a business is an adverse
opinion. This indicates that the firm’s financial records do not conform to GAAP. In
addition, the financial records provided by the business have been grossly
misrepresented. Although this may occur by error, it is often an indication of fraud.
When this type of report is issued, a company must correct its financial statement and
have it re-audited, as investors, lenders and other requesting parties will generally not
accept it.

Disclaimer of Opinion
On some occasions, an auditor is unable to complete an accurate audit report. This
may occur for a variety of reasons, such as an absence of appropriate financial
records. When this happens, the auditor issues a disclaimer of opinion, stating that an
opinion of the firm’s financial status could not be determined.

Auditor's Report
By 

WILL KENTON

Reviewed by 

MARGARET JAMES

Updated Feb 8, 2021

What Is an Auditor's Report?

An auditor's report is a written letter from the auditor containing their opinion on
whether a company's financial statements comply with generally accepted
accounting principles (GAAP) and are free from material misstatement.

The independent and external audit report is typically published with the
company's annual report. The auditor's report is important because banks and
creditors require an audit of a company's financial statements before lending to
them.

KEY TAKEAWAYS

 The auditor's report is a document containing the auditor's opinion on

whether a company's financial statements comply with GAAP and are free
from material misstatement.
 The audit report is important because banks, creditors, and regulators
require an audit of a company's financial statements.
 A clean audit report means a company followed accounting standards
while an unqualified report means there might be errors.
 An adverse report means that the financial statements might have had
discrepancies, misrepresentations, and didn't adhere to GAAP.
How an Auditor's Report Works
An auditor's report is a written letter attached to a company's financial statements
that expresses its opinion on a company's compliance with standard accounting
practices. The auditor's report is required to be filed with a public company's
financial statements when reporting earnings to the Securities and Exchange
Commission (SEC).

However, an auditor's report is not an evaluation of whether a company is a good

investment. Also, the audit report is not an analysis of the company's earnings
performance for the period. Instead, the report is merely a measure of the
reliability of the financial statements.

The Components of an Auditor's Report

The auditor's letter follows a standard format, as established by generally
accepted auditing standards (GAAS). A report usually consists of three
paragraphs.

 The first paragraph states the responsibilities of the auditor and directors.
 The second paragraph contains the scope, stating that a set of standard
accounting practices was the guide.
 The third paragraph contains the auditor's opinion.

An additional paragraph may inform the investor of the results of a separate audit
on another function of the entity. The investor will key in on the third paragraph,
where the opinion is stated.

The type of report issued will be dependent on the findings by the auditor. Below
are the most common types of reports issued for companies.
Clean or Unqualified Report
A clean report means that the company's financial records are free from material
misstatement and conform to the guidelines set by GAAP. A majority of audits
end in unqualified, or clean, opinions.

Qualified Opinion
A qualified opinion may be issued in one of two situations: first, if the financial
statements contain material misstatements that are not pervasive; or second, if
the auditor is unable to obtain sufficient appropriate audit evidence on which to
base an opinion, but the possible effects of any material misstatements are not
pervasive. For example, a mistake might have been made in calculating
operating expenses or profit. Auditors typically state the specific reasons and
areas where the issues are present so that the company can fix them.

Adverse Opinion
An adverse opinion means that the auditor has obtained sufficient audit evidence
and concludes that misstatements in the financial statements are both material
and pervasive. An adverse opinion is the worst possible outcome for a company
and can have a lasting impact and legal ramifications if not corrected.

Regulators and investors will reject a company's financial statements following an

adverse opinion from an auditor. Also, if illegal activity exists, corporate officers
might face criminal charges.

Disclaimer of Opinion
A disclaimer of opinion means that, for some reason, the auditor is unable to
obtain sufficient audit evidence on which to base the opinion, and the possible
effects on the financial statements of undetected misstatements, if any, could be
both material and pervasive. Examples can include when an auditor can't be
impartial or wasn't allowed access to certain financial information.

Example of an Auditor's Report

Excerpts from the audit report by Deloitte & Touche LLP for Starbucks
Corporation, dated Nov. 15, 2019, follow.

Paragraph 1: Opinion on the Financial Statements

"We have audited the accompanying consolidated balance sheets of Starbucks
Corporation and subsidiaries (the 'Company') as of September 29, 2019, and
September 30, 2018, the related consolidated statements of earnings,
comprehensive income, equity, and cash flows, for each of the three years in the
period ended September 29, 2019, and the related notes (collectively referred to
as the 'financial statements').

In our opinion, the financial statements present fairly, in all material respects, the
financial position of the Company as of September 29, 2019, and September 30,
2018, and the results of its operations and its cash flows for each of the three
years in the period ended September 29, 2019, in conformity with accounting
principles generally accepted in the United States of America."

Paragraph 2: Basis for Opinion

"We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (PCAOB). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement, whether due to error or
fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the

amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our
opinion."
Audit Reports: Types of Audit Reports |
Advantages | Limitation
Audit, Audit Opinion

Definition:
The audit report is the report that contains the audit’s opinion, which independent
auditors issue after they examine the entity’s financial statements and related
reports.

Those including financial statements, management accounts, management

reports. Or others report like compliant reports. Mostly, those reports are issued
based on auditors’ professional examination against the measurement criteria or
standards.
For example, auditors perform their audit on the client’s financial statements
against the accounting standard used to prepare them.
In other words, they review whether or not financial statements are prepared true
and fair view following the accounting standards. Those standards could
be IFRS, US GAAP, or local GAAP.

After completing their testing, the auditor then issues the audit report on
the financial statements that they just audited. This report will also include their
opinion on the financial statements.
Using:
The audit report is used by many stakeholders, including the entity’s
management, directors, shareholders, investors, government bodies, banks, and
many others.
In most cases, the audit report is issued to cover financial statements over 12
months or a year period. Investors use audit reports and audited financial
statements to assess the entity’s financial performance and financial position for
their investment opportunity.
The government agency uses the audit reports and financial statements to
assess the completeness and accuracy of the tax declaration.
Shareholders and the board of directors use the audit report to assess the
integrity of management and transparency of financial statements.
Noted:
Different audit reports contain different audit opinions, and the main cause is the
different misstatements found in the financial statements. Therefore, different
types of audit reports represent a different level of assurance.
Here are the four types of report that we mentioned above,

Four Types of Audit Reports:

There are four types of audit reports issued by auditors on financial statements.
Each type of report contains different meanings and messages from auditors to
users of financial statements.
Those audit reports included the Unqualified Audit Report (Clean Audit Report),
Qualified Audit Report, Disclaimer Audit Report, and Adverse Audit Report. The
following are the detail of audit reports.
#1 Unqualified Audit Report (Clean Audit Report):
The auditor issued an unqualified audit report to financial statements when
auditors found no material misstatements after their testing. Therefore, this report
contains an unqualified opinion from an independent auditor.
The report showed that the entity financial statements are prepared and present
true and fair and complying with the accounting framework being used.
This is a good sign for all kinds of stakeholders that willing to uses the financial
statements. You might find whether the audit report is clean or not in the opinion
paragraph.
An unqualified Audit report apparently shows the shareholders that financial
statements are a true and fair presentation and free from all material
misstatements.
But also imply that the management team has high integrity to the shareholders.
However, before putting your truth on the audit report, ensure that the auditor
who issued the reports is from independent audit firms. Big four audit firms are
the firm that most of the shareholders put their truth on.
#2 Qualified Audit Report:
The qualified Audit report is the reported issue by auditors to the financial
statements that found material misstatements. But those material misstatements
are not pervasive.

For example, the opening balance of the entity contains a large number of
inventories that could not verify.
In this case, the auditor issue a qualified audit opinion on the qualified audit
report. However, if the auditor thinks that the misstatement is pervasive, they will
issue an adverse opinion in their report.
This kind of report, only inventories that mention are matters. Others information
in the financial statements is true and fair.
The term of seriousness, the qualified audit report is more serious than
unqualified due to material misstatements on the mention items or accounts in
the financial statements.
#3 Adverse Audit Report:
An adverse Audit Report is a type of audit report issued to the financial
statements when auditors found material misstatements in the financial
statements.
The misstatements found here are different from the material misstatements
found in qualified audit reports. They are materially misstated for themselves and
affect others’ accounts and items in the whole financial statements. These are
called pervasive.
That means all the items and accounts in the whole financial statements could
not be trusted by shareholders, investors, and other stakeholders. In this report,
auditors will list down the client name, financial statements that they were audited
and the period the financial statements covered.
Auditors will also state all misstatements found and how they have affected the
financial statements and the users of financial statements.
In most cases, auditors also state all the material found in the Others Matters,
which is the message to the users of financial statements to be aware of when
they read the financial statements for their own purpose.
#4 Disclaimer Audit Report:
The disclaimer audit report is the report that issues the financial
statements where there is matter to auditor’s independence and those mater
cause auditors not be able to obtain sufficient audit evidence to support their
opinion.
This has happened when auditors are prevented to access to certain information
related to items or accounts in financial statements while those items or accounts
are believed to be materially misstated and pervasive.
 Auditors might not issue the disclaimer opinion if the restrictions are made only
the items or accounts that material misstated but not pervasive.
Advantages of Audit Reports:
 Assure Financial Statements. Audit reports are issued by a professional
and independent auditor who is operational independent from the entity’s
management. The report issued from them could help the financial statement
users to assure that financial information is correct.
 Prove management integrity on their shareholders. As an auditor is
independent of management, the report could prove whether managements are
honest to their shareholders or not. But, again, this is related to principle and
agency theory.
 It is the requirement of law and regulation. Most countries required the
entities that have the specific criteria to have their financial statements audited by
independent auditors—those criteria like annual turnover, the value of assets,
and the number of employees. The auditor is the evidence that could prove to the
government that the entity complies with the law.
 It is the requirement of shareholders. Most of the corporate shareholders
want their entity’s financial statements to be audited. This report is examined by
the experts and express in the easy words that could be understood by most of
the shareholders who do not have financial or audit background.
 Parent company’s requirement. Many parent companies that have
subsidiaries operating in other countries or even in the same country normally
required their subsidiaries’ financial statements to be audited. This report could
help them manage the subsidiary even more effectively.
 Help stakeholders to understand about entity’s financial and operational
situation. This is probably the most important point. The auditor is required to
state the auditor report whether the entity has any going concern problem or not.
This includes financial and non-financial problems that could lead the entity to
face bankruptcy in the next foreseeable period from the audit report date.
Limitation of Audit Reports:
 The scope of the audit might be limited by management. This is a popular
discussion about audit’ issues. In the audit standard, auditors should have the full
right to access information that could help them obtain audit evidence to express
 their opinion. However, in practice, management might try their best to prevent
auditors from obtaining some sensitive information. These are probably the
management don’t fully trust auditors ethic related to confidentiality or
management themselves have integrity problems. These problems might prevent
auditors from providing the best quality of audit opinion that it should be.
 Time too constraints for auditors. In practice, auditor normally faces time
constraints which do not provide them enough time to perform their testing as
they should be.
 Auditors’ Independence. The code of ethics required auditors to stay
independent from their audit clients. This is to ensure that auditors do not bias
when they perform their works and issue audit opinion.
 Risks that might not detect by auditors: Inherent Risks and Fraud Risks.
The audit standard requires auditors to have proper audit planning as well as risk
assessment. This ensures that the auditing quality is maintained and audit risks
are identified and minimized. However, these things could not auditor eliminate
all kinds of material misstatement risks from financial statements. For example,
inherent risks and fraud risks.
 Auditors Qualification and Competency. This is also an important point. To
run an audit firm, we all know that someone who represents the firm needs to
hold a CPA qualification. But the thing is because of the competition, and
because of the number of works, the quality of the audit report might have some
problems. As you may know
Conclusion:
As listed above, there are four types of audit reports, and those reports are
different because of the nature of material misstatements found by auditors.
Different types of audit reports contain different audit opinions. The unqualified
report issued for the financial statements contains no material misstatement.
Qualified reports, on the others hand issued to the financial statements that
contain material misstatements, yet those misstatements are only for
themselves.
The auditor will issue an adverse opinion when the financial statement contains
pervasive misstatement. Yet, they will disclaim not to express their opinion if they
could not have enough to review financial statements.
Understanding the Four Types of Audit
Reports
July 1st, 2019

Nicholas J. Price

A couple of things that make audit reports so complicated is that some of the
information isn’t readily available and some of the information is subjective
in nature. Auditors have to make various judgmental assumptions in
finalizing reports. The audit opinion is a very important part of the audit
report because it makes a statement about a company’s financial status to
investors. The audit report provides a picture of a company’s financial
performance in a given fiscal year. Investors analyze audit reports and base
much of their investment decisions on information contained in the audit
reports.
Investors are particularly interested in the audit opinion because it’s a
reflection of the integrity of the audit report and projects an image of the
company. The audit opinion is based on such things as how available the data
was to them, whether they had an opportunity to follow all due procedures,
the level of materiality and other issues along those lines. All of these things
are subjective in nature and depend on the auditor’s opinion.
An adverse audit opinion can deflate a company’s status. In some cases,
adverse audit opinions may lead to litigation. Regulatory bodies may also
scrutinize the audit opinion and the audit report to verify the information for
accuracy and any impact on taxation matters.
Board management software programs support the accountability and
transparency of financial reporting to ensure that companies get the best
auditor opinion letter. Governance Cloud by Diligent Corporation is a fully
integrated platform of board management software solutions that will ensure
that companies get through the audit process with flying colors. The platform
assures confidentiality with its state-of-the-art security features. Boards can
set granular permissions so that only authorized parties have access to various
parts of the auditing process.
 Auditors form their opinions by making professional judgments and getting
legal opinions. It’s vital that companies have internal controls and financial
policies in place and have them reviewed regularly by the company’s internal
audit team to ensure that everything is in order before the audit ensues.

>> See more with our “How To Be Audit Ready”

Whitepaper
What Do Auditors Do During an Audit?
Before the audit, management provides financial information to the audit
committee. During the annual audit, the auditor has to review the processes
and procedures that the company used to prepare the financial information.
The auditors check to see whether the company uses GAAP or other
applicable reporting frameworks in preparing the reports.
Annual audits demonstrate transparency in corporate financial reporting,
which is a positive step in establishing good relationships between companies
and their investors, as well as the public.

Four Different Types of Auditor Opinions

Auditors have the option of choosing among four different types of auditor
opinion reports. An auditor opinion report is a letter that auditors attach to the
statutory audit report that reflects their opinion of the audit. The four types of
auditor opinions are:

1. Unqualified opinion-clean report

2. Qualified opinion-qualified report
3. Disclaimer of opinion-disclaimer report
4. Adverse opinion-adverse audit report
Unqualified Opinion – Clean Report
 An unqualified opinion is considered a clean report. This is the type of
report that auditors give most often. This is also the type of report that most
companies expect to receive. An unqualified opinion doesn’t have any kind
of adverse comments and it doesn’t include any disclaimers about any clauses
or the audit process. This type of report indicates that the auditors are
satisfied with the company’s financial reporting. The auditor believes that the
company’s operations are in good compliance with governance principles and
applicable laws. The company, the auditors, the investors and the public
perceive such a report to be free from material misstatements.
Qualified Opinion-Qualified Report
When an auditor isn’t confident about any specific process or transaction that
prevents them from issuing an unqualified, or clean, report, the auditor may
choose to issue a qualified opinion. Investors don’t find qualified opinions
acceptable, as they project a negative opinion about a company’s financial
status. Auditors write up a qualified opinion in much the same way as an
unqualified opinion, with the exception that they state the reasons they’re not
able to present an unqualified opinion.
A common for reason for auditors issuing a qualified opinion is that the
company didn’t present its records with GAAP.
Disclaimer of Opinion-Disclaimer Report
When an auditor issues a disclaimer of opinion report, it means that they are
distancing themselves from providing any opinion at all related to the
financial statements. Some of the reasons that auditors may issue a disclaimer
of opinion are because they felt like the company limited their ability to
conduct a thorough audit or they couldn’t get satisfactory explanations for
their questions. They may not have been able to decipher the correct nature of
some transactions or to secure enough evidence to support good financial
reporting. Auditors that aren’t allowed an opportunity to observe operational
procedures or to review particular procedures may feel like they’re not able
to express a definite opinion, so they feel a disclaimer is necessary and in
order. The general consensus is that a disclaimer of opinion constitutes a very
harsh stance. As a result, it creates an adverse image of the company.
Adverse Opinion-Adverse Audit Report
The final type of audit opinion is an adverse opinion. Auditors who aren’t at
all satisfied with the financial statements or who discover a high level of
material misstatements or irregularities know that this creates a situation in
which investors and the government will mistrust the company’s financial
reports.
An auditor’s adverse opinion is a big red flag. An adverse audit report usually
indicates that financial reports contain gross misstatements and have the
potential for fraud. Adverse opinions send out a high alert that the company’s
records haven’t been prepared according to GAAP. Financial institutions and
investors take this opinion seriously and will reject doing any kind of
business with the company.
Auditors use all types of qualified reports to alert the public as to the
transparency, reliability and accountability of companies. Auditor opinions
place pressure on companies to change their financial reporting processes and
incorporate practices like ESG and cybersecurity healthcare governance so
that they’re clear and accurate. Companies, investors and the public highly
value unqualified reports.
Audit Report – Basics,
Format and Content
Updated on:  Mar 30, 2021 - 11:57:26 AM

12 min read

For any enterprise, the audit report is a key deliverable which shows the end
results of the entire audit process. The users of financial statements like
Investors, Lenders, Customers, and others base their decisions and plans on
audit reports of any enterprise. An audit report is always critical to influencing
the perceived value of any financial statement’s audit.

The auditor should be careful in issuing the audit report as there is are a large
number of people placing reliance on such report and taking decisions
accordingly. The report should be issued by being unbiased and objective in
discharging the functions.

NOTE: The threshold limit of Rs 1 crore for a tax audit is proposed to be

increased to Rs 5 crore with effect from AY 2021-22 (FY 2020-21) if the
taxpayer’s cash receipts are limited to 5% of the gross receipts or turnover,
and if the taxpayer’s cash payments are limited to 5% of the aggregate
payments.
Contents of an Audit Report
The basic structure of an audit report as prescribed by the Standards on
Auditing is as follows:

Heading Brief of contents

Title Title should mention that it is an ‘Independent Auditor’s Report’.

Addressee Should mention clearly as to whom the report is being given to. For
Members oMentions that it is the Management’s responsibility to P
Financial Statements. f the company, Board of Directors

Management’s   
Responsibility for Financial
Statements

Auditor’s Responsibility Mention that responsibility of the Auditor is to express an unbiased

the financial statements and issue an audit report.

Opinion Should mention the overall impression obtained from the audit of fi
statements. For example Modified Opinion, Unmodified Opinion

Basis of the Opinion State the basis on which the opinion as reported has been achieved
 basis should be mentioned.

Other Reporting If any other reporting responsibility exists, the same should be men
Responsibility example Report on Legal or Regulatory requirements

Signature of the Auditor The engagement partner (auditor) shall sign the audit report.

Place of Signature The city in which audit report is signed.

Date of Audit Report Date on which the audit report is signed.

Other headings being basic and self-explanatory in nature, we need to

understand the about the opinion part precisely. This part forms the basic crux
of an audit report.

Opinion in an Audit Report

There are primarily two kinds of opinions issued by an auditor in his / her audit
report:

 Unmodified Opinion (also called Unqualified report)

 Modified Opinion (also called Qualified report)

Unmodified Opinion

Issued for any audit where the auditor is satisfied that the financial statements
present a true and fair view of the operations and transactions in an enterprise
during the period. An audit report with an Unmodified Opinion is also known
as a ‘Clean Report’. An Unmodified report develops confidence among users
of Financial statements and annual reports of an enterprise. It provides an
impression that the financial statements are reasonably free from any
misstatements and results as appearing there are true and fair.

Modified Opinion

Whenever the auditor has specific findings during his / her audit and
concludes that an Unmodified Opinion cannot be issued due to the nature of
findings, a Modified Opinion is issued in the audit report. There are two basic
reasons due to which an auditor concludes on issuing a Modified Opinion:

 Based on the audit and evidence, finds out that the financial
statements contain a certain degree of material misstatements.

 Unable to obtain sufficient and appropriate evidences to conclude

that the financial statements are free from material misstatements.

There are three kinds of modified opinions which are issued according to the
findings and circumstances:

 Adverse Opinion
 Qualified Opinion

 Disclaimer of Opinion

Qualified Opinion

A Qualified Opinion is given in a situation where:

 The auditor concludes that misstatements are material but the impact
is not so high that it would render the whole financial statements
unacceptable; or

 The auditor is unable to obtain sufficient or appropriate audit

evidence but concludes that there are indications of misstatements in the
financial statements (but the degree is not high).

Example of a Qualified Opinion paragraph in audit report: In our opinion,

except for the incomplete disclosure of the information referred to in the Basis
for Qualified Opinion paragraph, the financial statements give the information
required by the Companies Act, 2013, in the manner so required and give a
true and fair view in conformity with the accounting principles generally
accepted in India:

 In case of the Balance Sheet, of the state of affairs of the company as

at March 31, XXXX;

 In case of Profit and Loss Account, of the profit/loss for the year
ended on that date; and
 In case of the Cash Flow Statement, of the cash flows for the year
ended on that date.

Adverse Opinion

An Adverse opinion shall be issued by the auditor where he concludes that on

the basis of evidence obtained and procedures performed, there are material
misstatements in the financial statements and the impact of the same is high.

Example of a Qualified Opinion paragraph in audit report: In our opinion,

because of the omission of the information in the Basis for Adverse Opinion
paragraph, the financial statements do not give the information required by the
Companies Act, 2013, in the manner so required and also, do not give a true
and fair view in conformity with the accounting principles generally accepted in
India:

 In case of the Balance Sheet, of the state of affairs of the company as

at March 31, XXXX;

 In case of Profit and Loss Account, of the profit/loss for the year
ended on that date; and

 In case of the Cash Flow Statement, of the cash flows for the year
ended on that date.

Disclaimer of Opinion

A Disclaimer of Opinion is to be issued by an auditor in cases where the

auditor concludes that he / she is not able to obtain sufficient and appropriate
evidences. In such scenario, the auditor is not able to form an opinion and
thus, disclaims form providing an opinion on the financial statements. The
impact of material misstatements and degree of the same is high enough.

Example of a Draft Disclaimer of Opinion: We were engaged to audit the

financial statements of ABC Private Limited (“the entity”) which comprises the
Balance Sheet as at March 31, XXXX, the statement of Profit and Loss, (the
statement of changes in equity) and statement of Cash Flows for the year
then ended, and notes to the financial statements, including a summary of
significant accounting policies. We do not express an opinion on the
accompanying financial statements of the entity. Because of the significance
of the matters described in the Basis for Disclaimer of Opinion section of our
report, we have not been able to obtain sufficient and appropriate audit
evidence to provide a basis for an audit opinion on these financial statements.

Emphasis of Matter paragraph in an

Audit Report
In a situation where the auditor concludes that it is important to draw the
attention of users of the financial statement to a particular reported item,
he/she may include an Emphasis of Matter  paragraph in his / her audit report.
In this case, the auditor is not required to modify his / her opinion. The
paragraph is added when the issue is not a key audit matter and only requires
disclosure for a better understanding of the financial statements.
Example of circumstances where the auditor shall include Emphasis of
Matter paragraph in audit report:

 To inform users of financial statements that the same has been

prepared under a special purpose framework;

 The auditor discovers some facts after the date of an audit report and
the auditor issues new or amended audit report.

 Uncertainty about the future outcome of an ongoing litigation.