Audits are an external review of a company's financial information, conducted by a public accounting firm. Audit reports from the auditors are used by external stakeholders to assess the company's financial health.
Facts
Audit reports are issued after auditors finish testing a company's financial information and internal controls. These reports list specific information regarding accounting errors that were found during the audit.
Types
Three types of audit reports are issued by auditors: unqualified, qualified and adverse. An unqualified opinion indicates not-material misstatements; a qualified opinion indicates violations of accounting standards; and an adverse report indicates specific wrongdoings by the company.
Benefits
A standard audit report usually means that auditors have issued a non-qualified opinion regarding a company's financial information. This allows the business to seek outside investment for future operations.
Warning
Qualified or adverse audit opinions will subject the company to further audits, causing negative goodwill toward outside stakeholders. Companies may also face regulatory fines from government agencies if they misled the public about the company's financial health.
Expert Insight
The American Institute of Certified Public Accountants (AICPA) issues information to auditors and companies on Generally Accepted Auditing Standards (GAAS), the highest auditing standards in the U.S.
