Chartered Accountants

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Example-The Auditor's Report

To the Shareholders of................................................

1We have audited the balance sheet of ............................... as at ..................., 19... and the statements of income, retained earnings and changes in financial position for the year then ended. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2We conducted our audit in accordance with generally accepted auditing standards3. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement4. An audit includes examining, on a test basis, 5evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

6In our opinion, these financial statements present fairly, in all material respects, the financial position of the company as at ............., 19... and the results of its operations and changes in its financial position for the year then ended in accordance with generally accepted accounting principles7.






  1. The financial statements which were audited are identified in this introductory paragraph. The respective responsibilities of management and the auditor regarding the financial statements are explicitly stated.
  2. Scope paragraph-A description of the audit is provided.
  3. Generally accepted auditing standards-Included in the standards is a requirement that those performing the audit have adequate technical training and proficiency in auditing, as well as a sufficient understanding of internal control to plan the audit. The examination should be carefully planned and performed with due care and an objective state of mind. The standards also require that sufficient appropriate evidence be obtained during the audit by inspection, observation, inquiry, confirmation, computation and analysis, to support the content of the report. These standards are developed and published in the CICA Handbook by the Canadian Institute Of Chartered Accountants (CICA) and apply equally in any financial statement audit, regardless of the type or size of the entity.
  4. This sentence introduces the concept of reasonable assurance and materiality. The auditor does not provide absolute assurance. The objective is to reduce the risk of not detecting a material misstatement to an appropriately low level, and this calls for professional judgement on the auditor's part. Misstatements in financial statements arise from departures from generally accepted accounting principles and include departures from fact, inappropriate determination of accounting estimates and ommissions of necessary information. A misstatement in financial statements would be material if it is probable that it would change or influence the decision of a person who is relying on the financial statements. The materiality decision is a matter of professional judgement for the auditor.
  5. On a Test Basis-The auditor performs tests only and does not undertake a total verification of all transactions. The nature, extent and timing of these tests is determined by independant professional judgement.
  6. Opinion Paragraph-In this paragraph, the auditor does not present a statement of facts. The result of the audit is an informed professional opinion based on evidence obtained.
  7. Generally Accepted Accounting Principles-The manner of recording and measuring transactions and the methods of classification and presentation are based on basic concepts of accounting. Standards are developed and published in the CICA Handbook. Any significant item that has not been properly treated or disclosed must be mentioned in the audit report as a qualification of the opinion.
  8. Date-The date indicated is the date at which the auditor substantially concluded the field work necessary to support the opinion expressed in the auditor's report.

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