Definition
Auditor's Report
The auditor's report is the independent auditor's formal opinion on whether a company's financial statements give a true and fair view and comply with accounting standards.
Attached to the annual financial statements, the report states the auditor's opinion, unmodified (clean), qualified, adverse or a disclaimer, and highlights key audit matters. For listed Indian companies, auditors follow the Standards on Auditing and report under the Companies Act.
A clean report gives assurance but is not a guarantee against fraud. Investors pay close attention to qualified opinions, emphasis-of-matter paragraphs and key audit matters, which flag areas of judgement, estimation uncertainty or disagreement with management.
Related terms
- Related Party Transaction (RPT)An RPT is a deal between a company and parties connected to it, like promoters or group firms, which can be a governance red flag if abused.
- Qualified OpinionA qualified opinion is an auditor's verdict that the financial statements are fairly presented except for a specific issue the auditor disagrees with or could not verify.
- Emphasis of MatterAn emphasis of matter is a paragraph in the auditor's report that draws attention to a disclosed issue without modifying the audit opinion.
- Notes to AccountsNotes to accounts are the detailed disclosures accompanying financial statements that explain accounting policies, breakdowns and items not visible on the face of the statements.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.