10 December 2009
What is the difference between Qualification and observation and stating of facts in an audit report? When do you say the report is qualified and when is it just stating of the facts?
13 December 2009
From observations of the facts; it is decided whether qualification is necessary.
Qualification means some reservations i.e. adverse comments on the accounts. The value (amount) is also reported to what extent these are adverse. It may be possible that there is difference between the action points of the management while accounting and observing the same matter by the auditor in different manner.
Since an Auditor is an external person having professional qualification; generally it is deemed that whatever comments he puts are of immense value.
If the auditor opine that the presentation in the accounts of a particular matter is not properly included or management has not prudently applied their judgment or there are violation of accounting standards; then they make a note in the Audit Report thereof. This is known as qualification.
At the time of conducting the Audit; the Auditor has to observe so many issues; whatever comes into his knowledge which are in line with the law, accountancy and the company's strucutre; no adverse comments are made by him. However; in the present Financial Reporting pattern; even these matters are included to inform the reader that all these points are ok.
Without observations; no qualifications can be made.
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