Audit Decision
Introduction
An audit decision is the opinion issued by an independent auditing firm on the financial statements of a company. An audit decision considers both the volumes and reliability of information considered as well as the scope of the audit and any limitations imposed. The auditor considers all financial statements, including the balance sheet, income statement, statement of cash flow, and other financial documents that may be included in the audit.
Purpose
The primary purpose of the audit decision is to provide an analysis of the financial condition of the audited entity based on the findings of the audit. Through the analysis the auditors are looking for any errors, misstatements, or inconsistencies. The findings of the audit are used to assess the reliability of the financial information and make an objective opinion on its accuracy. This opinion is expressed in the audit decision.
The Purpose of the Audit Decision
The purpose of the audit decision is to ensure that investors, creditors, and regulatory bodies have a clear understanding of the financial condition of the business they are dealing with. By providing an objective opinion on the accuracy of the financial statements the auditor has improved the transparency and accuracy of the information available.
An audit decision is also used to assess the adequacy of the accounting records, procedures and internal control. The findings of the audit can be further investigated by management to identify any areas of weakness in financial management.
Scope of the Audit
The scope of the audit considers the transactions, account balances and records during the period under audit. The auditor is responsible for assessing the accuracy and completeness of the financial statements under review. The scope is determined by the terms of the engagement and the audit plan that is used.
The scope determines the level of assurance or opinion expressed in the audit decision. If the audit is limited to certain elements of financial statements, the opinion provided is referred to as a limited assurance opinion. If the audit covers all items, the opinion expressed is referred to as an unmodified opinion.
Opinion expressed in the Audit Decision
The opinion expressed in the audit decision depends on the scope of the audit. Generally the opinion expressed is based on the audit standards set by the audit firm. The auditor bases the opinion on their opinion if the financial statements are a fair representation of the companys financial position during the audit period.
Unmodified Opinion
An unmodified opinion is the opinion of the audit that provides assurance that the financial statements are a true and fair representation of the companys financial position. This opinion means that the assumptions and judgments made by management in the preparation of these documents are in compliance with accounting principles generally accepted in the jurisdiction. This opinion includes a detailed analysis performed by the auditor of the various management assertions in the financial statements.
Modified Opinion
A modified opinion may be issued if the audit was limited in scope or if the auditor has identified certain conditions or issues that have a material effect on the financial statements. A modified opinion can be expressed as qualified or adverse. A qualified opinion is expressed when the auditor is satisfied that the financial statements represent a true and fair view, with the exception of a limitation that has been noted in the report. An adverse opinion is expressed when the auditor is of the opinion that the financial statements do not represent a true and fair view.
Conclusion
An audit decision is an independent opinion by a qualified auditor on the fairness of the financial statements of a company. The opinion is expressed in the audit decision which states whether the financial statements are a fair representation of the financial position of the company as accurately as possible. The scope of the audit determines the opinion to be expressed and typically a modified opinion may be expressed if the scope was limited or certain conditions or issues were identified by the auditor.
