4 Audit Report Types (With Skills and Example Report)

Updated September 30, 2022

An audit report can be challenging because information may not be readily available and is typically subjective, requiring auditors to make judgemental assumptions. Therefore, companies often ask internal audit teams to review their financial actions and policies to ensure accuracy and adherence to guidelines before external auditors examine financials. Understanding audit report types can help you learn how audits reflect a company's financial status or prepare you for an auditing career.

In this article, we discuss the types of audit reports and their uses, examine an audit report's structure, explore an auditor's essential skills, and provide an example audit report.

Audit report types

Here are the four audit report types and their uses:

Clean report

This type of report typically demonstrates the auditor's unqualified opinion. This means that the auditor didn't discover any inconsistencies with the company's financial records. The auditor's opinion is unqualified because the company has no requirement to meet any extra requirements or qualifications to improve its financial status. The company obtains a clean report when it demonstrates that it observes the Generally Accepted Accounting Principles (GAAP). This is because the auditors only give it when they believe the company observes applicable laws and governance principles. Auditors frequently issue a clean audit report, and most investors require it before investing.

Related: Accountant vs. Auditor: Differences and Similarities

Qualified report

A qualified audit report demonstrates an auditor's qualified opinion of a company's financial status. The report shows that the company has not observed the necessary standards, which the GAAP sets. However, it also shows that the company isn't performing its fiscal business in a misrepresenting or illegal way. A qualified opinion means that a company has to meet specific qualifications or requirements to have the auditors approve its financial status. Auditors generally issue this report if there are business operations that they're unsure about during the audit process. They also commonly note requirements the company can meet to receive approval.

Disclaimer report

Auditors issue disclaimer reports when they intend to excuse themselves from offering an opinion about a company's financial statement. The report expresses that the auditor feels the company obstructed them from making accurate observations. This usually happens if a company doesn't provide sufficient answers to an auditor's questions or if their financial records contain errors. This leads the auditor to conclude that they can't provide definite opinions about the company's financials. A disclaimer report is serious, as it gives the company an adverse image and can decrease the likelihood of investment.

Adverse opinion report

Auditors present adverse opinion reports when they detect misrepresentations or irregularities in a company's financial statements. In this case, the auditor considers the financial misstatement pervasive and material. Adverse opinion reports generally demonstrate that the company has disregarded the GAAP. Outside investors and financial institutions take this opinion seriously and typically avoid conducting any business with the company in question. The company's corporate officers can also receive charges. Companies can correct the errors in their financial statements and re-audit them when they receive an adverse opinion report.

Related: Differences Between Public Accounting and Private Accounting

Content of an audit report

Here are the typical contents of a typical audit report:


The document's heading usually includes the addressee, auditor's name, work location, and date they conducted the audit. Auditors also note how long their reviews took. For example, an auditor can only conduct an audit based on the company's previous year of financial statements. This means that in 2021, an auditor can only audit a company's financial statements up to the conclusion of 2020.

Auditor's responsibility

Auditors commonly provide a written explanation of their duties, regardless of the type of result they issue. It guarantees that the auditor conducted the audit to the best of their ability. It also demonstrates that their opinion is without any personal agenda or bias.

Auditor's opinion

The report's next paragraph explains an auditor's professional opinion regarding a company's financial status. An auditor notes whether the audit type is a qualified, clean, disclaimer or adverse opinion report. The auditor also notes whether the company has observed the GAAP standards.

Basis for opinion

This section narrates why an auditor issued the report type and varies depending on the type of audit. The opinion basis commonly includes a restatement of the audit report type and the types of reviews and tests the auditor conducted. Usually, it also includes the results and any GAAP standard the company failed to observe. This section can consist of the auditor's recommendations if the company received a qualified audit report.


Auditors conclude the report document with their official signatures, the date of the signing, and the city in which they signed. This lets investors and consumers know who performed the review process and how recent the report is because companies publicize their audit reports after an auditor reaches their final decision.

Related: How to Make a Signature in 5 Steps (With Tips and Uses)

Essential skills for an auditor

Here are some essential skills for any auditor:

Financial skills

Financial skills involve understanding, managing, and reviewing an entity's financial resources. It also includes the ability to develop successful and sustainable financial innovations. Auditors require an expansive knowledge of financial evaluation and management to ensure they accurately understand financial statements and can provide opinions. Financial expertise also helps auditors to detect fraud or deliberate misstatements in a company's financial statements. You can develop your financial skills through a degree in a finance-related course. There are also various finance-related courses available online.

Attention to detail

This enables auditors to discover seemingly negligible, but essential information. It's a crucial skill requirement for auditors because their responsibilities thrive on accuracy. Observing small, vital details can help an auditor catch minor misstatements or irregularities. For example, a small transaction or slightly inflated figure can lead to a different audit opinion, so it's critical for auditors to detect such inconsistencies and produce an accurate report. This skill is also essential to ensure that the auditor detects false answers when questioning the company's management.

Analytical skills

Analytical skills help auditors create a logical approach to solving problems. These skills involve gathering and evaluating information to reach rational conclusions. Auditors require excellent analytical skills to perform their responsibilities successfully. For example, an internal auditor requires analytical skills to review the company's financial policies. This ensures that external auditors leave a clean report after auditing the company's financial statement. You can build analytical skills by engaging in multiple logical puzzles and games, such as crossword puzzles and riddles. Math is also an excellent developer of analytical skills because of its intrinsic logical and step-by-step problem-solving nature.

Communication skills

Communication skills involve collecting and transferring information to other people via writing, body language, or oral communication. These skills are crucial for auditors because they rely on them at different points in their careers and daily activities. For example, internal auditors have several meetings with a company's management to advise and inform them of acceptable financial standards. They also typically train other accounting team members to ensure the implementation of correct practices. External auditors also require this skill because they question the company's officers during auditing. You can develop your communication skills through practice and better understanding your duties.

Interpersonal skills

Interpersonal skills refer to the skills that enable positive interaction with others. These skills are essential for internal auditors because their responsibilities include interacting with other team members. Internal auditors work in a company's accounting department and efficient interaction among the group is necessary for the department to run smoothly. You can develop interpersonal skills by practicing empathy, body language skills, and communication skills.

Related: Finance vs. Accounting (Understanding the Differences)

Organizational skills

These skills help auditors use their resources efficiently by keeping them focused on different concurrent responsibilities. This skill set is essential to auditors because they examine financial reports and provide resulting reports ahead of a deadline. Organizational skills can help auditors efficiently allocate their time to their respective tasks to ensure efficiency. Several scheduling tools can help auditors keep track of their time and progress.

Example format of an audit report

Here's an example of how an audit report appears:

Independent Auditors' Report

To the Board of Directors and the Shareholders,
King Stores Limited,
14, Pennsylvania Drive

Report on the financial statements

We Queen's auditors have audited the accompanying financial statements of King Stores Limited Company as of December 31, 2021. We have assessed the related income statements, shareholders' equity, expense reports, and liabilities for the previous year. King Stores Limited's management is responsible for the financial statements' objectivity and integrity. We're responsible for expressing our opinion on King Stores Limited's financial status based on the documents we audit.

We performed our audit according to the auditing standards that the Generally Accepted Accounting Principles (GAAP) establishes. These standards demand that we prepare an audit to review if the financial statements of King Stores Limited are without material misstatement. This audit includes an evidence examination to support King Stores Limited's financial statements and evaluates the accounting principles which the company's management has used.

We believe that our audit has offered a reasonable justification for our opinion. In our report, the financial statements we earlier mentioned show King Stores Limited's financial position fairly. Between March 2, 2020, and 2021, the results of King Stores Limited's operations conform with the standards which the Generally Accepted Accounting Principles establish.

King Queen
May 5, 2021

Please note that none of the companies, institutions or organizations mentioned in this article are affiliated with Indeed.


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