Preparation of audit reports;

              10 HASKINS & SELLS February
BY way of introduction to a discussion
of certain features of the technique
of audit reports, it is submitted that the
subject is of vital interest to the account­ants,
individually, as well as to the firm, as
the failure to prepare reports which are
pleasing to our clients may detract from or
even nullify otherwise excellent work. It
is probably safe to assert that in a large
majority of cases a client's impression of
the quality of a professional auditor's work
is derived from the auditor's report.
It is not the present purpose to discuss
methods of auditing or the preparation of
statements to be included in an audit re­port,
nor will attention be given to such
important phases of the subject as gram­mar,
diction, etc.
There are undoubtedly instances where
a client would be perfectly satisfied with
our representative's oral statement that no
evidences of irregularities or serious errors
had been disclosed by an audit, but even in
such cases it is usually advisable to render
a formal report to that effect.
As distinguished from the comparatively
few cases where a simple report in the form
of a letter will suffice, there are the large
majority of audits where the clients desire
to be informed as to their financial condi­tion
and, to some extent, as to the details
of the operations of their business.
Although there are cases where our
clients' instructions cover the point, it usual­ly
devolves upon us to decide for ourselves
of what our reports shall consist. In this
connection, much responsibility rests with
the accountant in charge of the work. Al­though
accountants are expected to famil­iarize
themselves with our methods by the
study of sample reports, it is thought that
the following suggestions may be helpful.
The accountant should endeavor to an­ticipate
the desires of the client and fur­nish
all data which in his opinion the client
will require or appreciate; on the other
hand, he should consider the client's inter­ests
as much as possible in the matter of
expense and not prepare statements or
other matter unnecessarily. The principles
of ethics thus applied to the preparation
of reports should be observed also in the
preliminary work. For this and other rea­sons,
the composition of the report as to
statements and statistical data should be
determined with reasonable definiteness
before the work of the audit has proceeded
far. The following are cited as examples
of items in the verification of which the
procedure in certain respects may depend
upon whether or not full detail is to be
shown in the report:
Accounts Receivable and Payable—
If details are not to be shown (and
the accounts are not to be con­firmed),
the client's trial balances
may be checked, thus obviating the
necessity for preparing complete
schedules.
Securities Owned, Notes Receivable,
etc.—If the details of these and
similar accounts are not to be in-eluded
in the report, the accountant
can frequently obtain copies of the
client's schedules, which, although
not usually in the form acceptable
for use in our reports may be util-
The Preparation of Audit Reports