Distinguish between a Report and a Certificate. State the need for an auditor’s report.

An auditor’s report essentially contains the expression of an opinion. Thus, what an auditor communicates through his report is primarily his opinion about the financial position of the company that he formulates on the basis of his evaluation of the evidence collected during the course of audit. A report should be distinguished from a certificate. A certificate involves confirmation of certain facts, it does not contain any opinion.

Thus a report is an expression of opinion on the financial statements of a company but a certificate certifies the truth of the statement. Report is based on an examination of relevant records, certificate is a guarantee of absolute correctness and accuracy.

The auditor cannot be held responsible for the accuracy of the report because report is simply an opinion on the working results of the company, but signing a wrong certificate can make the auditor liable and the auditors cannot certify the accounts. The auditors opinion in any auditing situation necessarily involves exercise of judgement. This also highlights the fact that auditing is not a mechanical process of vouching and ticking but is an exercise in application of judgement by the auditor.

Need of an auditor’s report.

The form and content of the audit report are of utmost importance since it is only through the audit report that the users of the information come to know of the opinion of the auditor. The auditors are considered to be the agents of the shareholders for whom their report is primarily meant.

The members of the company do not extend their trust, faith and confidence to the report submitted by the auditors who are appointed to check the correctness and fairness of the financial statements. In fact, the report offers an opportunity to the auditors
to explain to the entire body of shareholders what they consider significant and the relevant information relating to the financial position of the company for the period under reporting.

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