How should a company auditor prepare the audit report in India?

The company auditor is required to prepare the audit report as per the conditions set out in the Company Auditor’s Report Order 2003, which requires auditors to report on various aspects of the company, including, among other things, fixed assets, inventories, internal audit standards, internal controls, and statutory dues. It must be obtained before the commencement of annual general meeting, which should be half within six months from the end of the financial year.

After examining the various aspects of the company, auditors must express one of the following opinions to conclude the audit report:

• Unqualified opinion – it is used when the auditor concludes that the financial statements give a true and fair view in accordance with the financial reporting framework used for the preparation and presentation of the financial statements.
• Qualified opinion – it is used when an unqualified opinion cannot be expressed but the problem does not trigger the use of disclaimer of or adverse opinion. Normally, a qualified opinion should be expressed as being “subject to” or “except for” the problem that hinders the opinion to be unqualified.
• Disclaimer of opinion – it is used when there is a limitation of scope that is so material and pervasive that the auditor cannot obtain sufficient materials to conclude an opinion on the financial statements of the persons.
• Adverse opinion – it is used when a disagreement with the management becomes so material and pervasive to the financial statements that the auditor can only conclude the audit report is inadequate to disclose misleading or incomplete nature of the financial statements.