The purpose and usefulness of standard audit report Essay

The purpose and usefulness of standard audit report - Essay Example Normally, audit reports presents the external review of the financial information of a company, conducted by an accounting firm and shareholders use it in assessing the financial health of a company. The Financial Reporting Council (FRC) in UK recommended for the enhancement of the responsibilities in financial reporting for the audit committees through publicizing of expanded reports. The auditor reporting entails coordinated structure that leverages the resources by IAASB (Boeckman et al. 2013, p. 76). A standard report summarizes an audit by the public accounting firm about the liquidity strength of a company. Auditing process entails comparison of the findings to internal audits to identify any discrepancies or errors involved therewith. When the audit is clean, standard audit report results. The standard audit report is the most used audit report, and it ensures that companies do not defraud the investors. Failure of the audit reports to conform to the acceptable standards in ac counting creates apprehension amongst the shareholders of the company (Boeckman et al. 2013, p. 77). The corporate finance statements and other investors express the concerns on the usefulness of standard audit reports (SAR). ... Three types of audit reports issued by auditors include the qualified, unqualified and adverse. Qualified opinions indicate the violation of accounting standards; adverse report shows shortcomings of the company; while unqualified opinion shows not-material misstatements. Audit reports are beneficial to a company. Standard audit report indicates issuance of non-qualified opinion based on the financial information of a company. This allows for extension of business by seeking outside investment to enhance future operations (Carcello 2012, p. 22). Furthermore, standard audit reports entail warnings. Adverse or qualified audit opinions subject the company to further audits resulting in negative goodwill to the outside investors. Companies also experience regulatory fines from the government agencies due to misleading the public on the financial health of the company. Standard audit reports also contain the expert insight. The accounting firms issue information to companies and auditors on acceptable auditing standards (Carcello 2012, p. 24). Standard Audit Report (SAR) SAR changed insignificantly over the last 60 years. Audit reports had not changed prior to 1988 Statements on Auditing Standards (SAS). There were significant changes made on the audit report by the financial statements. Professions tried making changes in 1965, and SAS incorporated introductory, opinion and scope changes in the third paragraph. The changes enhanced the usefulness of the audit report by giving a comprehensive definition of audit, as well as maintaining effective communication of management responsibilities, and the auditor in order to reduce SASs expectation gap. The main objective of SAR is to enhance credibility of the financial statements by the