An Audit report is required by all public listed companies. It is designed to be in the interest of shareholders to ensure that they are a true and fair representation of the financial statements contained in the annual report.
In large companies often the management (those that run the company) differ to the shareholders (those that own the company). For this reason the intention of the management may differ to that of the shareholders. For example the management may choose accounting policies that make it look as if the company has done better then it actually has. To facilitate this problem an audit is made.
What is the role of an auditor?
An auditor is an independent party (i.e. an accounting firm) that is employed to review the financial statements. They do not test to see how the figures were actually obtained (i.e they don’t read every single receipt etc) but they make a view as to whether the financial statements provide a true and fair representation of the financial statements contained in the financial report. This means the will look to see whether the reports comply with GAAP.
What is an unqualified opinion?
When auditors make an unqualified opinion they in effect saying that in their opinion, they believe that the statements provide a true and fair view of the company