Your audit report and management letter serve different purposes. Understanding both helps your board or committee make better use of the audit findings.

What the audit report tells you

The audit report contains the auditor’s independent opinion on your financial report.

An unmodified opinion means the auditor concludes that the financial report has been prepared, in all material respects, in accordance with the applicable financial reporting framework. It does not mean every transaction has been checked or that the organisation has no risks or control weaknesses.

If the auditor identifies a material issue, or cannot obtain enough appropriate evidence, the opinion may be modified. Depending on the circumstances, this may be a qualified opinion, an adverse opinion or a disclaimer of opinion. Read the section explaining the basis for that opinion carefully and discuss its implications with your auditor.

What the management letter tells you

A management letter or audit closing report communicates findings arising from the audit. These may relate to financial reporting, record keeping or internal controls.

Australian Auditing Standard ASA 260 requires significant deficiencies in internal control identified during the audit to be communicated in writing to those charged with governance, such as the board or committee. Other observations and recommendations may also be included.

Turn findings into action

Discuss the findings at a board or committee meeting. For each matter, agree on the action required, nominate a responsible person and set a realistic completion date.

Keep a record of management’s response and review progress during the year. Addressing findings promptly can strengthen your processes and make the next audit easier.

Audit Edge communicates audit findings clearly, helping those charged with governance understand the matters requiring their attention.