An auditor’s report is important for businesses and non-profits as it certifies that an external auditor has examined financial records and ensures legal requirements are met. It can also suggest improvements to accounting methods and does not necessarily imply wrongdoing.
Most types of business and non-profit organizations rely on the auditor’s report as part of their annual financial reports, addressing investors, a Board of Directors and others who have an interest in the organization’s continued success. Essentially, an auditor’s report is a device that certifies that an external auditor has examined the organization’s financial records. The auditor’s report also includes what is called an auditor’s opinion, which in essence reports and comments on the findings of the investigation. Here are some of the reasons why an auditor’s report can be very important to the well-being of any type of organization.
One of the main objectives of the auditor’s report is to ensure that the company’s finances, both Accounts Payable and Accounts Receivable, are being conducted in a manner compatible with legal requirements. External auditors are used for the review, as it is assumed that auditors with no connection to the day-to-day financial functions of the organization will be free of bias. It is important that any audit is conducted in such a way as to ensure that no shortcuts or improprieties, accidental or otherwise, come to light and can be corrected. From this perspective, auditors’ reports can be a useful tool for newer companies that are still struggling to ensure proper accounting of all assets, cash flow and liabilities incurred during the calendar period under consideration.
Another function of the auditor’s report is to point to resources that can help the organization improve its current accounting methods. This would not involve issues such as recommending different types of accounting software or recommending the services of a specific accounting firm. But the report may include suggestions for basic changes to the accounting process that will help eliminate duplication of effort, as well as suggestions for more appropriate classification of expenses, processing employee expense reports, and the like.
Many people assume that being audited in some way implies that wrongdoing is suspected. In fact, an annual audit is simply a means of ensuring that all aspects of internal accounting are being carried out correctly, with the aim of pointing out areas where the process can be improved. It is not uncommon for the auditor’s report to cite areas where a few minor changes would make the overall financial reporting of the organization’s status more accessible and understandable to those who have a financial interest in the ongoing operation of the organization.
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