What is an independent audit report? How is an independent audit report prepared? These are questions that many businesses are interested in. In this blog, RSM Vietnam will analyze this issue.
Table of contents:
What is an audit report?
How is an independent audit report prepared?
How are material misstatements in financial reports understood?
What support can RSM Vietnam provided to businesses?
1. What is an audit report?
An audit report is a report that includes an auditor's opinion with the purpose of providing the auditor's assessment of the accuracy and fairness of the financial statements and other information as per the auditing standards, accounting principles, and current Vietnamese accounting regulations.
Therefore, an audited report is a report where the reader can ascertain the accuracy and fairness of the financial figures and other matters presented in the financial statements.
2. How is an independent audit report prepared?
After completing the audit procedures, auditors are required to prepare an audit report following the specific guidelines and report templates outlined in auditing standards, instead of doing so freely. Relevant auditing standards include standards numbered 700, 705, 706, 710, 720, 800, 805, 810, 1000, 930, and 920.
Depending on the scope and nature of each type of audit, the audit opinion will have different characteristics (see details in the respective standards).
For financial statement audits (a common type of audit), there are four types of audit opinions:
1.Unqualified Opinion
This opinion is issued when the auditor concludes that the financial statements have been prepared, in all material respects, in accordance with the applicable financial reporting framework.
2.Qualified Opinion
This opinion is issued in cases where, based on the audit evidence obtained, the auditor concludes that individual or collective misstatements, although material, do not pervasively affect the financial statements. This opinion can also be given when the auditor is restricted in their audit work and cannot obtain sufficient appropriate audit evidence to form an unqualified opinion. In such cases, the auditor concludes that the potential effects of the undetected misstatements (if any) could be material but do not pervasively affect the financial statements.
3. Adverse Opinion
An adverse opinion is issued when, based on sufficient and appropriate audit evidence, the auditor concludes that the individual or collective misstatements have a pervasive and material impact on the financial statements. This type of report is issued when the audit scope is severely restricted or when the audit materials are so unclear and ambiguous that the auditor cannot conduct the audit as planned.
4. Disclaimer of Opinion (or Unable to Express an Opinion)
A disclaimer of opinion is issued when the auditor is unable to obtain sufficient appropriate audit evidence to form an opinion and concludes that the potential effects of the undetected misstatements (if any) could be pervasive and material to the financial statements. This type of opinion signifies that the auditor is unable to express an opinion on the financial statements.
(Section 05 of VSA 200 Standard)
"To provide a basis for the auditor to issue an audit opinion, Vietnamese auditing standards require the auditor to obtain reasonable assurance about whether the financial statements, as a whole, are free from material misstatement, whether due to fraud or error. Reasonable assurance is a high level of assurance that can only be achieved when the auditor has obtained sufficient appropriate audit evidence to reduce audit risk (the risk of the auditor issuing an inappropriate opinion when the financial statements contain material misstatements) to a low, acceptable level. However, reasonable assurance is not an absolute guarantee, as inherent limitations in the audit process mean that most of the audit evidence the auditor relies on to form conclusions and opinions is persuasive rather than conclusive (see guidance in paragraphs A28 - A52 of this standard)."
Based on the explanation provided above, it can be understood that in all cases, it cannot be asserted that the financial statements are entirely free from material misstatements. However, if an unqualified audit opinion is issued, the likelihood of material misstatements is very low.
3. How are material misstatements in financial reports understood?
(Section 06 of VSA 200 Standard)
"The concept of materiality is used by the auditor throughout the planning and performance of the audit and in evaluating the effect of identified misstatements, including those that have not been corrected (if any) in the financial statements (see requirements and guidance in VSA 320 and VSA 450). In general, misstatements, including omissions, are considered material when, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of financial statement users. The judgment about materiality needs to be made in the context of specific circumstances, based on the auditor's understanding of the financial information that the financial statement users are interested in, the scale or nature of the misstatement, or a combination of both factors. The auditor's responsibility is to provide an opinion on the financial statements as a whole, and, therefore, the auditor is not responsible for detecting immaterial misstatements in the financial statements."
4. What can RSM Vietnam offer to businesses?
At RSM Vietnam, we only employ the best talent. We have dedicated professionals who are experts in key areas of our clients' needs, and many possess high-level industry knowledge. That's why our clients can be assured of comprehensive advisory services. But we don't stop there. Many of our Partners are recognized as visionary leaders/entrepreneurial individuals with a passion for the future. Through RSM Vietnam, clients have the opportunity to benefit from their expertise and insights. This is our commitment to quality.
To consistently deliver high-quality audit services, we place great importance on investing in audit methodologies. We always closely monitor the latest technological advancements and share them across our entire network. RSM Vietnam utilizes a unified global audit methodology and software system from RSM Global.
Some of RSM Vietnam's audit and assurance services:
Our team of experts has provided financial reporting and audit advisory services to numerous businesses. Whether your business is small or large, mastering current accounting standards and financial reporting is crucial. RSM Vietnam will help you stay ahead by providing reports along with quality and relevant advice.
Auditing of listed companies
Auditing of foreign-invested enterprises
Financial statement audit
Construction audit
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