What is the importance of an auditor’s report from the point of view of investors?

The auditors are considered to be the agents of the shareholders for whom their report is primarily meant. The auditor shall make a report to the members of the company on the examined by him, and on every Balance Sheet and Profit and Loss Account, and on every other document declared by this Act to be part of or annexed to the Balance Sheet and Profit and Loss Account, which are laid before the company in general meeting during his tenure of office and the report shall state whether, in his opinion and to the best of his information and according to the explanation given to him, the said accounts give the information required by this Act in the manner so required and give a true and fair view:

  • In the case of Balance Sheet, of the state of the company’s affairs as at the end of the financial year.
  • In the case of Profit and Loss Account, of the profit or loss of the financial year.

The Audit report serves the following purpose:

  • It tells that the contents of the financial statements of the company represent a true state of affairs of the company.
  • An auditors report is an indicator of the fairness of opinion and credibility of financial statements.

It serves as information to the shareholders, bankers, creditors, financial institutions and potential investors of the market. to get reliable insight into the financial position of the company as shown by the Profit and Loss Account and the Balance Sheet.

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