Fundamental Principle of Reporting

The reporting principle governs how auditors communicate the results of an audit. The ultimate goal of an audit is to provide a written report that conveys the auditor's opinion regarding whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework. This principle encompasses the evaluation of audit evidence and the formulation of an opinion based on that evidence.

Basic Contents of the Auditor’s Report

The auditor’s report typically includes the following major sections:

1. Title and Addressee: The report begins with a title indicating it is an independent auditor's report and specifies the addressee, such as the board of directors or shareholders.

2. Opinion Section: This section explicitly states the auditor's opinion on whether the financial statements are fairly presented. It often begins with the phrase "In our opinion," followed by a statement about the conformity of the financial statements with the applicable framework.

3. Basis for Opinion Section: The auditor describes the responsibility for the audit, mentions adherence to applicable auditing standards, and asserts independence and ethical compliance.

4. Responsibilities of Management: This section outlines management’s responsibility for the preparation and fair presentation of the financial statements and for internal controls to ensure accuracy and completeness.

5. Auditor’s Responsibilities: The responsibilities section elaborates on the auditor’s obligation to obtain reasonable assurance and details the scope of the audit, including risk assessment, materiality consideration, and evidence gathering.

6. Other Sections: For issuers, additional elements may include references to the audit of internal control over financial reporting or explanatory paragraphs related to significant matters such as consistency or going-concern uncertainties.