A listed company is obliged to present its financial results on a quarterly basis. In the annual report, the listed company needs to disclose both the audited financial statements as the board report which includes the report on corporate governance issues. The relationship between a listed company and its auditors is therefore evident and important.
Auditors thoroughly check the accuracy of business records of companies; they need to ensure that records and statements by organizations are accurate and realistic and in accordance with the financial reporting framework.
The audit is usually conducted in accordance with the International Standard on Auditing (ISA) and/or GAAS (Generally Accepted Auditing Standards). These standards proclaim that auditors are independent in all matters related to the audit, are trained adequately and comply with the highest professional criteria when carrying out the audit and preparing the report.
Auditors review management, operations and financial reporting, assessing goodwill and evaluate the internal control systems. Finally, they sometimes check physical inventories, confirm accounts receivable and other accounts with a third party, and provide objective advice for improving financial reporting and internal controls.
The so-called ‘auditor's report’ is a formal opinion, or disclaimer thereof, and serves as an assurance service in order for the user to make decisions based on the results of the audit. These reports are used to attract investors, obtain loans and improve the financial reputation of an entity.
Recently a “new style” auditors report is becoming increasingly common practice, containing more company specific and control specific elements, giving the reader more insight in the auditor’s control activities and the companies’ financial situation.