The purpose of a statutory auditor's report is to provide a written opinion on whether an entity’s annual accounts:

• give a true and fair view;
• have been properly prepared in accordance with the relevant financial reporting framework; and
• have been prepared in accordance with requirements of the Companies Act 2006.

An auditor's report is seen as a trusted ‘kitemark’ on a company’s financial statements from an independent qualified professional. It enhances the credibility of financial statements by:

• providing assurance to shareholders that an entity’s financial statements are free from material misstatement;
• helping to ensure that an entity's management are held accountable to shareholders;
• allowing auditors to communicate significant issues through paragraphs covering opinion modifications, material uncertainties, and other matter paragraphs.
• providing valuable insights and commentary on significant matters addressed during the audit through KAMs.

Further reading:

• What auditors do: the scope of audit
• Financial reporting: who does what?

Section 475 of the Companies Act 2006 dictates that a company’s annual accounts for a financial year must be audited unless the company is exempt from audit.

Private companies that are small, dormant or have a parent guarantee are exempt. A large number of companies fall into this category. A small company is defined as a company that meets any two of the following criteria:

• a turnover of £15m or less;
• £7.5m or less on its balance sheet;
• and 50 employees or less.

Section 476 of the Companies Act provides an option for members of the company to require an audit.

Further reading:

• Audit exemption
• Is an audit required for a company?

Auditors carry out an audit to provide a report for, and only for, the members of the company as a body (Chapter 3, Part 16 of the Companies Act 2006).

However, UK auditor's reports are publicly available within the audited financial statements that are filed on the Companies House database. Many entities also publish the audited financial statements on their website.

Many stakeholders have an interest in how companies are run and may look to auditor's reports for comfort about the reliability of a company’s reporting. This is not just to assess the financial position and performance, but to evaluate corporate governance, company values, economic impact on the local community and strategic plans for the future.

Auditor's reports are also of interest to, among others: potential investors, creditors, employees, consumers, the public, regulators, government and trade unions. 

• Opinion
  Including the truth and fairness of the financial statements
• Basis for opinion
  Scope of the audit, what the auditors did
• Conclusions relating to going concern
  Unless a material uncertainty exists...
  (If there is a material uncertainty related to going concern, and appropriate disclosure has been made in the financial statements, a separate section entitled “material uncertainty related to going concern” should be included in the auditor's report. If the relevant additional disclosure requirements have been included in this section, the “conclusions related to going concern” section can be excluded.)
• Other information
  The auditor’s responsibility for information other than the financial statements in the annual report
• Opinions on other matters prescribed by the Companies Act 2006
  For example, including work performed on the directors’ remuneration report and strategic report
• Matters on which the auditor is required to report ‘by exception’ 
  For example, relating to keeping proper accounting records
• Responsibilities of directors
  For the preparation of financial statements
• Auditor’s responsibilities for the audit of the financial statements
  Including conducting an audit in accordance with auditing standards
• Use of the report
  Restricting it to those to whom it is addressed 
• Signature and date 

Some of the matters in an auditor’s report, including the issues below, are specific to certain types of entities. For example, the approach to the audit below is only required for public interest entities (PIEs) and other entities that are required (and those that choose voluntarily) to report on how they have applied the UK Corporate Governance Code. 

A public interest entity is as defined by the FRC’s Glossary of Terms.

• Approach to the audit
• scope of the audit
• key audit matters (KAMs)
• application of materiality
• Opinion on the company’s corporate governance statement
• Other matters which auditors are required to address (such as appointment of auditor and information on non-audit services).  

• Material uncertainty relating to going concern;
• A modified opinion, including ‘qualified opinions’ and basis for modified opinion section;
• An emphasis of matter paragraph and other matter paragraph. 

Emphasis of matter paragraphs do not change the audit opinion. They draw the attention of users to a matter presented or disclosed in the financial statements that the auditor thinks is fundamental to their understanding of the financial statements. In practice, they are not common but they are often significant and, for example, may refer to the financing structure of an entity.

Other matter paragraphs refer to a matter that is not required to be presented or disclosed in the financial statements, but that the auditor thinks is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report.