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The auditors around the world follow a complete process for conducting the audit of the organizations. When the auditor finished conducting the audit, then the duty of the auditor is to provide unbiased opinion. The opinion of the auditor has huge significance for the organizations because through the auditor's opinion the organization gets an idea whether its financial statements have been created according to the standards or not. The national bank of Oman (NBO) was established in the year 1973. The national bank of Oman is among the largest banks in Oman. The National bank of Oman was considered as the first local bank in the country. According to international standard o Auditing (1SA 700), before providing the opinion the auditor must be assured whether the financial statement is being prepared effectively or not. The main things which he auditors evaluate in the audit procedure include qualitative analysis of accounting practices, analysis of accounting policies, consistency in financial statements, and the assumptions which the financial analysts made for creating the financial statements. There are many ways through which the auditing practices can be improved. The auditing firms can set such rules & regulations which allow the auditors to deeply investigate the organization's operations and their financial statements.
Table of Contents
2. Elements
of Standard Audit Report
2.2. Report’s
introduction section
2.4. Findings/Executive
summary
3. Structure
of Audit Report of National Bank of Oman
3.5. Responsibilities
of Management
3.7. Other
Legal & Regulatory Requirements
4. Recommendations
for Improving the Auditing Practices
6. References
Introduction of Elements of Standard Audit
The aim of this report is to provide deep insights regarding the elements of the audit report. The auditor who performs the audit of the organization creates an audit report in which the auditor provides its opinion. The audit report follows standard audit report format or according to the standards set by International Standards of Auditing (ISA). In this report the elements of the audit report are analyzed, and the information is provided how the audit prepared report I the light of ISA standards. The audit report of national bank of Oman is analyzed to understand how auditors prepare report by following ISA standards.
Elements of Standard Audit Report
The auditors around the
world follow a complete process for conducting the audit of the organizations.
When the auditor finished conducting the audit, then the duty of the auditor is
to provide unbiased opinion. The opinion of the auditor has huge significance
for the organizations because through the auditor's opinion the organization
gets an idea whether its financial statements have been created according to
the standards or not. The audit after conducting audit of the organization
create a report which provides detail about the accuracy of the financial
statements of the company. The standard audit report is being constructed
according to the standards of Generally Accepted Accounting Principles (GAAP)
& IFRS (International Financial Reporting Standards) and ISA (International
Standard on Auditing). Below are the key elements of the standard audit report:
1.
Report Title
2.
Report’s introduction section
3.
Scope Statement
4.
Findings/Executive summary
5.
Auditor Opinion
6.
Name of Auditor
7. Signature of Auditor
Report Title
The report that the auditor creates starts with the title. The tile of the report includes information such as the address of the organization. Usually the address which is mentioned in the auditor report is regarding the shareholders of the organization and the board of directors. In the report title section the date of conducting the audit is also included. Furthermore the report title includes work independent which shows that the audit which is being carried out in the organization is an external audit. The external audit is entirely different from internal audit, and both audits are not associated with each other.
Report’s introduction section
The report’s introduction
section is among the essential parts of the audit report. The introduction
section comes after the report title section. In the introduction section deep insights
regarding the financial performance of the organization are provided. In this
section the auditor discusses the performance of the organization along with
key practices of the corporation. This section also provides information about
the auditor who has conducted the audit of the corporation. The auditor in
introduction section defines the process which it has utilized for performing
the audit of the organization. The audit explains the documents or financial
statements which it uses for conducting the audit of the organization.
In the introduction
section, the auditor not only provides detail about the audit procedure but
also provide the information about the time frame in which the auditor has conducted
the audit of the organization. In simple words from report’s introduction
section anyone can get deep insights regarding the financial performance of the
corporation. In this section the auditor discusses what was its key duties and
responsibilities in the whole audit process. Any individual who wants brief
information regarding the audit process should overview the introductory
section
Scope Statement
The scope section is the
third key element of the audit report. This section of the audit report
explains the financial statements of the organization. The scope sections
explain the rules & policies which the organization follows regarding the
preparation of the statements. The scope statement provides brief information
about the key financial statements which include income statement, balance
sheet, cash flow statement and statement of changes in equity. All the
organization today create the financial statement according to the standards
which are provided by GAAP & IFRS. In this section the whole procedure through
which these statements have been analyzed is explained in the scope section.
The auditors who conduct an audit of the organization focus on various factors. The first thing which the auditor evaluates is whether the organization has internal audit department or not. If corporation has strong internal control and audit department is present, then the auditor might not have to investigate critically. However if the corporation has week internal control and the organization has no practice of internal audit, then the auditor will have to investigate various factors. The auditors apply various tests to investigate the authenticity and validity of financial information. The auditor not only gathers information from the management and employees but also gather the information from the third parties & suppliers of the corporation as well so that they can find out whether the information present in the statement is based on facts or not.
Findings/Executive summary
The findings section of
the audit report is considered among the essential part or elements of the
audit report because in this part of the audit report the auditor discusses the
findings of the audit which it has conducted in the organization. In this
section the auditor explains whether the information which is included in the
financial statement is accurate or not. The finding section explains whether
the financial statements are in accordance with the standards or not.
Furthermore the auditor provides brief information amount various financial matters
which the auditor thinks is important for the organization to know. The
executive summary/finding section is not the opinion section because, in this
section the auditor only discusses those things which it has found in the
organization during the audit process
Through findings section, the organization gets brief information about its financial performance and how the organization can implement such measures, which can help the corporation to further improve its operational and financial performance. The findings of the auditor indicate the errors in the organization and how those errors can be rectified. In other words the audit not only provides information but the ways through which organization performance can become more efficient. After providing the findings the auditor provides its opinion in the opinion section of the audit report.
Auditor Opinion
In the auditor opinion
section the auditor provides its opinion regarding the effectiveness and
accuracy of the financial statements. The auditor provides its opinion regarding
whether the statements have been created in accordance with the financial
standards or not. The opinion of the auditor based on the information which the
auditor has gathered in the audit process plus the financial statements which
the auditor has analyzed while conducting the audit. The opinion of the audit
has huge significance for the organization because the opinion of the auditor
boosts investors’ confidence in the organization. With positive opinion of the
auditor not only the confidence of the investor increase but also the goodwill
of the organization also increases. As a result of increased goodwill the
revenue & profitability of the corporation increases. It is not mandatory
that the auditor’s opinion will always be positive. If the auditor finds flaws
in financial reporting than the auditor will identify them in its opinion. It
is the duty of the organization to follow the suggestion given by the auditor
Name of Auditor
The name of the auditor is the second last section of the auditor report. In this section, the auditor wrote its own name and shows that the auditor is responsible for this report. The name of the auditor is usually in printed form. The external auditor works in the audit firm in most of cases, so the name of audit firm is also mentioned in case the auditor belongs to an audit firm.
Signature of Auditor
After mentioning its name, the auditor has done its signature, which shows that the auditor is accountable for the audit, which it has conducted in the corporation.
Structure of Audit Report of National Bank of Oman
The national bank of Oman (NBO) was established in the year 1973. The national bank of Oman is among the largest banks in Oman. The National bank of Oman was considered as the first local bank in the country. According to estimates, National Bank of omen has 60 branches all over Oman, including 173 ATMs. NBO has branches in Dubai & Abu Dhabi, as well. The NBO has worked in Egypt for approximately 10 years however in year 2014 NBO decided to leave Egypt. The NBO external audit is conducted by EY audit firm. The audit report of NBO follows a standard Audit Report Format which includes the following key components:
Report Title
The first section in any audit report is the report title. If the audit report of NBO is analyzed, then it can be seen that report has started with report title. The report title provides the information about what this whole report is all about and to whom this report is being presented to.
Opinion
In the NBO Audit report,
the 2nd section expresses the auditor's opinion. The auditor's
opinion explains that the organization has prepared the financial statements
according to the set standards and all the information in the statements is
presented without any major error. It can be said that the auditor has provided
the opinion according to ISA 700. The ISA 700 states that the auditor provides
an unmodified opinion if the auditor states that the financial statements are
in accordance with financial reporting framework. In NBO, it can be seen that
the auditor's opinion is in accordance with the ISA 700 standard
According to the international
standard o Auditing (1SA 700), before providing the opinion the auditor must be
assured whether the financial statement is being prepared effectively or not. The
main things which he auditors evaluate in the audit procedure include
qualitative analysis of accounting practices, analysis of accounting policies,
consistency in financial statements, and the assumptions which the financial
analysts made for creating the financial statements. After analyzing all the
aspects related to accounting and financial reporting than the auditor will
create an opinion. In Audit report of NBO the auditor has explained the basis
of its opinion
Basis of Opinion
The auditor’s opinion base on various factors that the auditor analyzes in the auditing process. While performing audit the auditor focus on various factors which determine the authenticity and accuracy of the financial statements. The things which determine the accuracy of the financial statement information include consistency in information, accounting policies and the standards which the organization follows for maintaining the financial statements. The auditors without proper analysis do not give their opinion. The auditor gives its opinion when it realizes that it has all the important information that it needs.
Key Audit Matters
The key audit matters are
those matters which the auditor things are most important in auditing the
financial statements of the organization. The auditor looks for such factors
which might have significant impact on the financial information of the
organization the factors which the auditor might think as key audit matters
include risk of material misstatement, the judgments made by the management of
the organization and the effect of judgments on the transactions of the
organization. Kay audit matters are considered an important part of the audit
report and do not require modification in the audit opinion.
The management of the organization has various responsibilities to maintain the standard of the financial statement. In the audit report of NBO the responsibilities of its management are discussed in detail. The manager of the organization performs various activities which influence the accuracy of the financial information. The high internal control, effective corporate governance and effective management are some of the activities which allow the organization to maintain efficiency and performance in the organization. The auditors evaluate the responsibilities of management to know the level of internal control because higher internal control leads to accuracy of financial statements.
Auditor Responsibilities
The auditor has various responsibilities and duties which it has to perform in the whole audit process. The audit report of NBO shows various auditor’s responsibilities. The key auditor responsibilities include determining the material misstatement in the financial statements, checking the level of internal control, focusing on the accounting policies, focusing on the behavior and policies of the management, and lot of other facts & figures. It is the responsibility of the auditor to provide unbiased opinion so that the organization can take benefit from the opinion of the auditor. The auditor's opinion must be based on accurate facts & figures.
Other Legal & Regulatory Requirements
The audit report of the NBO includes the section of the Legal & regulatory requirements. Some audit reports do not include this section however in the audit report of NBO the legal requirements are mentioned in detail. This section of the audit report provides brief information about the operations of the business and whether those operations are according to the laws of the specific country. This section provides information about the operations of the company and how they are following the rules which the government has implemented.
Name of Auditor
The name of the auditor is the second last section of the auditor report. In this section, the auditor wrote its own name and shows that the auditor is responsible for this report. If the auditor report of NBO is analyzed then it can be seen that name of auditor is mentioned at the end. The name of the auditor is in printed form. The external auditor works in the audit firm, and in these cases, the name of audit firm is also mentioned.
Signature of Auditor
After mentioning its name, the auditor has done its signature which shows that the auditor is accountable for the audit, which it has conducted in the corporation.
Recommendations for Improving the Auditing Practices
There are many ways through which the auditing practices can be improved. The auditing firms can set such rules & regulations which allow the auditors to deeply investigate the organization's operations and their financial statements. If the auditors are going to investigate the organization's operations effectively than there is a chance that the auditor will be able to provide more accurate opinion which will not only help the organization to improve its performance built will also help the organization to sustain in the market for a longer time period.
Conclusion of Elements of Standard Audit
If all the above discussion is summarized, then it is evident that the auditors around the world follow a complete process for conducting the audit of the organizations. When the auditor finished conducting the audit, then the duty of the auditor is to provide unbiased opinion. The opinion of the auditor has huge significance for the organizations because through the auditor's opinion the organization gets an idea whether its financial statements have been created according to the standards or not. The audit after conducting audit of the organization create a report which provides detail about the accuracy of the financial statements of the company. The auditor’s opinion base on various factors that the auditor analyzes in the auditing process. While performing audit the auditor focus on various factors which determine the authenticity and accuracy of the financial statements. The things which determine the accuracy of the financial statement information include consistency in information, accounting policies and the standards which the organization follows for maintaining the financial statements. The auditors without proper analysis do not give their opinion. The auditor gives its opinion when it realizes that it has all the important information that it needs.
References of Elements of Standard Audit
Basu, 2010. Fundamentals of Auditing. s.l.:Pearson
Education India.
Gay, G.
E., Gay, G. & Simnett, R., 2012. Auditing and Assurance Services in
Australia. s.l.:McGraw-Hill Australia.
Houghton,
K. A., Jubb, C., Kent, M. & Ng, J., 2010. The Future of Audit: Keeping
Capital Markets Efficient. s.l.:ANU E Press.
KUMAR,
R. & SHARMA, V., 2015. AUDITING: PRINCIPLES AND PRACTICE. 3 ed.
s.l.:PHI Learning Pvt. Ltd.
Pitt,
S.-A., 2014. Internal Audit Quality: Developing a Quality Assurance and Improvement
Program. s.l.:John Wiley & Sons.
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