Sample Disclosure – Auditors’ Report With Qualified Audit Opinion (13 November 2009)
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ABC BERHAD (12345-X)
Report on the Financial Statements
We have audited the financial statements of ABC BERHAD, which comprise the balance sheets as at 30 June 2009 of the Group and of the Company, and the income statements, statement of changes in equity and cash flow statements of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on Pages XX to XX.
Directors’ Responsibility for the Financial Statements
The Directors of the Company are responsible for the preparation and fair presentation of these financial statements in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Our responsibility is to express an opinion on these financial statements based on our audit. Except as described in the Basis for Qualified Opinion paragraph below, we conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Basis for Qualified Opinion
- A major portion of the financial records of a branch have been destroyed by fire. As a result, the Company is unable to re-produce the financial statements of this branch and hence no such financial statements were made available to us for our audit. The current year financial statements of the Group and of the Company have excluded this branch. Therefore, our audit of the Group and of the Company excludes this branch and we do not consider the financial effect of this branch on the financial statements of the Group and of the Company.
- The financial statements of the Group were prepared based on the financial statements of the Company and all of its subsidiaries. However, for this purpose unaudited financial statements of two foreign subsidiaries, DEF Pte. Ltd. and GHI Ltd. were used. At the date of this report, the auditors of these two subsidiaries have not completed the audit and hence have not replied to our Group Audit Questionnaire and have refused our request to review their audit work papers which we intend to rely upon to express our opinion as to whether we are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements. The directors have given us written assurance that they do not expect significant and material differences between the unaudited financial statements and the audited financial statements to be issued later upon completion of audit of these two subsidiaries. As a result, we wish to report that the Group’s financial statements are subject to changes that may be of significant and material in nature, depending on the outcome of the audit of the financial statements of these two foreign subsidiaries.
In our opinion, except for the effects of the adjustments on the financial statements, if any, as mentioned in the preceeding paragraph, the financial statements have been properly drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 30 June 2009 and of their financial performance and the cash flows for the financial year then ended.
Report on Other Legal and Regulatory Requirements
In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:
a) In our opinion, except for effect of the matters described in the Basis for Qualified Opinion paragraph above, the accounting and other records and registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.
b) We have considered the financial statements and the auditors’ reports of subsidiaries of which we have not acted as auditors, which are indicated in Note XX to the financial statements.
c) Except for the effect of the matters as described in the Basis for Qualified Opinion paragraph above the financial statements, we are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes.
d) Except for the two foreign subsidiaries mentioned in Paragraph 2 of our Basis of Qualified Opinion above, the auditors’ reports on the financial statements of the other subsidiaries were not subject to any other qualification significant and material to the consolidated financial statements and did not include any comment required to be made under Section 174 (3) of the Act.
This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.
XYZ & CO.
10 November 2009