The auditor’s report is the means by which the external auditors express their opinion on the truth and fairness of a procurement entity procurement records. It is for the benefit principally of the shareholders, but also for other users as the audit report is usually kept on public record with the filed procurement records.
The auditor is required to produce an audit report at the end of the audit which sets out his opinion on the truth and fairness of the procurement records. The report contains a number of consistent elements so that users know the audit has been conducted according to recognized standards.
Basic Elements of the Auditor’s Report
A measure of consistency in the form and content of the auditor’s report is desirable because it promotes credibility in the global marketplace and also helps to promote the reader’s understanding and to identify unusual circumstances when they occur. The auditor’s report must be in writing and includes the following basic elements, usually in the following layout.
| Basic elements
of audit report |
Explanation |
| Title | The auditor’s report must have a title that clearly indicates
that it is the report of the independent auditor. This signifies that the auditor has met all the ethical |
| requirements concerning independence and therefore
distinguishes the auditor’s report from other reports. |
|
| Addressee | The addressee will be determined by law or regulation, but is likely to be the shareholders or those charged with
governance. |
| Introductory paragraph | This shall identify the entity being audited, state that the procurement records have been audited, and identify the title of each statement that comprises the procurement records being audited, refer to the summary of significant procurement policies and other explanatory notes, and specify the date or period covered by each statement
comprising the procurement records. |
| Management’s responsibility for the procurement records | This part of the report describes the responsibilities of those who are responsible for the preparation of the procurement records. The report shall include a section headed ‘Management’s responsibility for the procurement records’ and describe management’s responsibility including the following:
· Management is responsible for the preparation of the financial statements in accordance with the applicable financial reporting framework. · Management is responsible for such internal control necessary to enable the preparation of procurement records that are free from material misstatement, whether due to error or fraud. · Reference shall be made to ‘the preparation and fair presentation of these procurement records’ (or’ the preparation of procurement records that give a true and fair view’) where the procurement records are prepared in accordance with a fair presentation framework. |
| Auditor’s
responsibility |
The report shall include a section entitled ‘Auditor’s responsibility’. The report must state that the auditor is responsible for expressing an opinion on the procurement records based on the audit. This section must also state that the audit was conducted in accordance with International Standards on Auditing and ethical
requirements and that the auditor planned and performed |
| the audit so as to obtain reasonable assurance that the procurement records are free from material misstatement. The report must describe an audit by stating that:
· An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the procurement records. · The procedures chosen depend on the auditor’s judgment of risks of material misstatements, and the auditor considers internal control relevant to the preparation of the procurement records in order to design appropriate audit procedures (but not to express an opinion on the effectiveness of internal control). · An audit includes evaluation of the appropriateness of the procurement policies used, the reasonableness of procurement estimates made by management, and the overall presentation of the procurement records. This part of the report shall also state whether the auditor believes that the audit evidence obtained is sufficient and appropriate to provide a basis for the opinion. |
|
| Opinion paragraph | If the auditor expresses an unmodified opinion on procurement records prepared in accordance with a fair presentation framework, the opinion shall use one of the following equivalent phrases:
· The procurement records present fairly, in all material respects, in accordance with [the applicable financial reporting framework]; or · The procurement records give a true and fair view of … in accordance with [the applicable financial reporting framework]. |
| Other reporting responsibilities | If the auditor is required by law to report on any other matters, this must be done in an additional paragraph below the opinion paragraph which is titled ‘Report on other legal and regulatory requirements’ or otherwise as
appropriate. |
| Auditor’s
signature |
The report must contain the auditor’s signature, whether
this is the auditor’s own name or the audit firm’s name or both. |
| Date of the report | The report must be dated no earlier than the date on which the auditor has obtained sufficient appropriate audit evidence on which to base the auditor’s opinion on the
procurement records. |
| Auditor’s
address |
The location where the auditor practices must be included |
Source: BPP. (2009). Auditing Assurance, ACCA study text
Qualities of a Good Procurement Audit Report
The essential of good audit report are as follows:
– Simplicity- Simplicity should be one of the important characteristics of good audit report. It should be as clear as understandable. It implies that ambiguous terms and facts should not be included in the audit report.
– Clarity- This indicates that the audit report should not conceal material information, which is required for evaluating and appraising the performance of the business.
– Brevity- The term signifies the conciseness in audit report. Repetition of facts and figures should be avoided in order to control the length of the report.
– Firmness- The report should clearly indicate the scope of work to be done and should clearly indicate whether the books of accounts exhibit ‘true and fair’ view of the state of affairs of the procurement entity.
– Objectivity- The report should be based on objective evidence. Opinion formed on the basis of information and evidences, which are not measured in terms of money, should not be incorporated in the audit report.
– Consistency- Consistency in presenting procurement information is the basis of good audit report. A good audit report should take into consideration whether consistency, as to the method of stock valuation and depreciation charges, has been adhered to.
– Accepted Principles- The audit report should be based upon the facts and figures that are kept in accordance with generally accepted procurement principles.
– Disclosure Principles-The audit report should be unbiased. It should disclose all the facts and the truth.
