Why auditor’s report matters to a first-time founder
The auditor’s report communicates the result and context of an audit to shareholders or other intended users. It includes more than the opinion, often explaining what the audit covered, the basis for the conclusion and who was responsible for what. Founders should read the whole report because changed opinions, serious doubt about the company’s ability to continue, or other key matters may affect financing and governance.
Examples of auditor’s report
A company’s annual financial statements include an auditor’s report with an unmodified opinion, meaning no important problem changed the conclusion. The report also explains the basis for that conclusion and describes management’s and the auditor’s responsibilities. A listed company may need additional sections, depending on the applicable standards and jurisdiction.
Common misunderstanding
The report is not the financial statements themselves and is broader than the auditor’s opinion. It does not guarantee every number, confirm that the business will survive or replace a buyer’s or investor’s own investigation. A disclaimer of opinion is not a favourable opinion; it means the auditor could not obtain enough evidence to express one.
When to use it
Use the report when reviewing audited accounts, lender requirements, regulatory filings or acquisition documents. Check who it is addressed to, the period, the accounting framework, the opinion and every change or paragraph drawing attention to an important matter. Ask an accountant or auditor to explain unfamiliar language before relying on it for a decision that could have a significant effect.