Definition
The independent auditor's report conveys the audit result to users. Under AU-C 700 for nonissuers, it has a title, an addressee, a Report on the Audit of the Financial Statements section with the Opinion and the Basis for Opinion, the responsibilities of management, the auditor's responsibilities, the signature of the firm, its city and state, and the date. Required headings appear in a set order, with the opinion first.
Why it matters in an audit or review
Users rely on this document and often nothing else. Lenders and regulators check the opinion type, the date, the statements covered, and any paragraphs flagging uncertainty. Putting the opinion ahead of the basis became standard with SAS 134. A report that departs from required wording may fail peer review or a regulator's inspection.
Example
Illustrative: a lender receives a report dated March 4 that covers only the balance sheet. The missing income and cash flow statements would show the report did not cover all statements presented, and the lender would return it for correction.
Common mistakes
Omitting the city and state, or dating the report before evidence was complete.
FAQ
Where is the opinion placed?
First, under the Opinion heading, followed by the Basis for Opinion section.
Sources
- AICPA, AU-C Section 700, Forming an Opinion and Reporting on Financial Statements (as amended by SAS 134): elements of the auditor's report, placement of the opinion first
- AICPA, SAS No. 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements
Definitions paraphrase AICPA and FASB guidance; read the standard itself before relying on a requirement. Example figures are illustrative. This page is guidance, not professional advice. Report an error