What is an Auditor's Report?

Definition: An evaluation that provides the auditor's opinion on the validity and reliability of an organization’s financial statements.

When preparing financial statements for completion, they often must contain an auditor's report from an external accountant or auditor. This document evaluates the financial statement's validity and reliablity.

An auditor's report is ultimately intended to provide reasonable assurance that there are no material errors within an organization's financial statements.

Preparation of the auditor's report

After auditing an organization's financial statements, the auditor will prepare their own report where they share their opinion about the validity and reliability of the financial statements.

The auditor is expected to provide a true picture of the organization and their financial statements. In the report, they must also state their connection to the financial statements, as well as whether they work for the company externally or internally.

The auditor can also express any reservations or additional information that they may have in the auditor's report. For example: if the auditor disagrees with the organization about the valuation of an asset, and they believe that this has a substantial impact on the financial statements, they should state this in their report.

What should be included in an auditor's report?

Rules are in place which outline what information an auditor's report should include, as well as in what order their report should be presented.

As with almost all accounting documents, auditor's reports are required to adhere to generally accepted standards that are established by the local governing bodies. Standards such as the Generally Accepted Accounting Principles ensure that the auditor's report on the fairness of certain financial statements is based on a generally accepted government framework.

A general auditor's report would include:

1. The name of the company they have audited as well as their accounting method
2. A summary of the auditor's responsibility and their report
3. The auditor's reservations (if any)
4. Conclusion
5. Additional information*
6. A report by the organization's management*
7. The date of the report and signature of the auditor

*If there is no additional information and/or if management has chosen not to prepare a management report, then 5 and 6 are omitted from the auditor's report. Management reports are not a requirement, however if one is to be listed with the financial statements, then the auditor must ensure that it is consistent with all of the financial documents.