Audit Report: Theauditor's reportis a formalopinion, ordisclaimerthereof, issued by either aninternal auditoror an independentexternal auditor as a result of an internal or externalauditorevaluationperformed on alegal entityor subdivision thereof (called an "auditee"). The report is subsequently provided to a "user" (such as an individual, a group of persons, acompany, agovernment, or even thegeneral public, among others) as anassuranceservice in order for the user to make decisions based on the results of the audit.An auditor's report is considered an essential tool when reporting financial information to users, particularly in business. Since many third-party users prefer, or even require financial information to be certified by an independent external auditor, many auditors rely on auditor reports to certify their information in order to attract investors, obtain loans, and improve public appearance. Some have even stated that financial information without an auditor's report is "essentially worthless" for investing purposes.

Types of Audit ReportIt is important to note that auditor's reports on financial statements are neither evaluations nor any other similar determination used to evaluate entities in order to make a decision. The report is only an opinion on whether the information presented is correct and free from material misstatements, whereas all other determinations are left for the user to decide.There are four common types of auditor's reports, each one presenting a different situation encountered during the auditor's work. The four reports are as follows:1. Unqualified Opinion Report2. Qualified Opinion Report3. Adverse Opinion Report4. Disclaimer of Opinion Report

1. Unqualified Opinion ReportAn opinion is said to be unqualified when the Auditor concludes that the Financial Statements give a true and fair view in accordance with the financial reporting framework used for the preparation and presentation of the Financial Statements. An Auditor gives a Clean opinion or Unqualified Opinion when he or she does not have any significant reservation in respect of matters contained in the Financial Statements. It is the best type of report an auditor may receive from an external auditor.An Unqualified Opinion indicates the following The Financial Statements have been prepared using the Generally Accepted Accounting Principles which have been consistently applied; The Financial Statements comply with relevant statutory requirements and regulations; There is adequate disclosure of all material matters relevant to the proper presentation of the financial information subject to statutory requirements, where applicable; Any changes in the accounting principles or in the method of their application and the effects thereof have been properly determined and disclosed in the Financial Statements.The following is an example of a standard unqualified auditor's report on financial statements as it is used in most countries, using the name XYZ Berhad as an auditee's name. Note that this report is acceptable only for periods ending before December 15, 20XX:

INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF XYZ BERHAD

Report on the Financial Statements We have audited the financial statements of XYZ Berhad, which comprise the balance sheets as at 31 December 20XX of the Group and of the Company, and the income statements, statements 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 information, as set out on pages AA to ZZ.

Directors Responsibility for the Financial Statements The directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. 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 about 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 entitys preparation of financial statements that give a true and fair view 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 entitys 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.

Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as of 31 December 20XX and of their financial performance and cash flows for the year then ended in accordance with Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia. Report on Other Legal and Regulatory Requirements In accordance with the requirements of the Companies Act1965 in Malaysia, we also report the following: (a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries have been properly kept in accordance with the provisions of the Act. (b) We are satisfied that the accounts of the subsidiaries that have been consolidated with the Companys financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes. (c) Our audit reports on the accounts of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act.

Other Matters 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.

(Audit Firm) [AF: 8888] Chartered Accountants

(Partner) [9999/9/99 (J/PH)] Chartered Accountant

Date [Location in the country]

2. Qualified Opinion ReportThe report is mostly like a Clear Opinion Report and only includes a paragraph viz. Basis for Qualification after Scope paragraph and before Opinion paragraph. Opinion paragraph in addition to its standard wording includes except for the matter described in Basis for Qualification paragraph the financial statements give true and fair view.Detailed below:AQualified Opinionreport is issued when the auditor encountered one of two types of situations which do not comply with generally accepted accounting principles, however the rest of the financial statements are fairly presented.

Example of Qualified Opinion reportINDEPENDENT AUDITORS REPORT TO THE MEMBERS OF XYZ BERHADReport on the Financial Statements We have audited the financial statements of XYZ Berhad, which comprise the balance sheet as at 31 December 20XX, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages AA to ZZ.

Directors Responsibility for the Financial Statements The directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. 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 about 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 judgments, 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 entitys preparation of financial statements that give a true and fair view 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 entitys 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 qualified audit opinion.

Basis for Qualified Opinion As discussed in Note GG to the financial statements, no depreciation has been provided in the financial statements which practice, in our opinion, is not in accordance with FRS 116, Property, Plant and Equipment. Had depreciation been provided for, the depreciation charge for the year ended 31 December 20XX would be RMXXX,XXX based on the straight-line method of depreciation using annual rates of 5% for the building and 20% for the equipment. In addition, the carrying value of property, plant and equipment and retained earnings would have been reduced by RMXXX,XXX and RMXXX,XXX respectively. The profit for the year ended 31 December 20XX would have been reduced by RMXXX, XXX.

Qualified Opinion In our opinion, except for the effects of the matter described in the Basis for Qualified Opinion paragraph, the financial statements give a true and fair view of the financial position of the Company as of 31 December 20XX and of its financial performance and cash flows for the year then ended in accordance with Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia.

Report on Other Legal and Regulatory Requirements In accordance with the requirements of the Companies Act 1965 in Malaysia, we also report that in our opinion: (a) Except for the matter as described in the Basis for Qualified Opinion paragraph, the accounting and other records have been properly kept in accordance with the provisions of the Act. (b) The registers required by the Act to be kept by the Company have been properly kept in accordance with the provisions of the Act.

Other Matters This report is made solely to the members of the Company, asa 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.

(Audit Firm) [AF: 8888] Chartered Accountants

(Partner) [9999/9/99 (J/PH)] Chartered Accountant

Date [Location in the country]

Adverse Opinion ReportAnAdverse Opinion Reportis issued on the financial statements of a company when the financial statements are materially misstated and such misstatements have pervasive effect on the financial statements.In Audit Report after Scope paragraph but before Opinion paragraph, Basis for Adverse Opinion paragraph is added. In Opinion paragraph the wording changes to, "Because of situations mentioned in Basis for Adverse Opinion paragraph, in our opinion the financial statements of XYZ Co. Ltd. as mentioned in first paragraph does not give true and fair view/are not free from material misstatements."AnAdverse Opinionis issued when the auditor determines that the financial statements of an auditee are materially misstated and, when considered as a whole, do not conform to GAAP. It is considered the opposite of an unqualified or clean opinion, essentially stating that the information contained is materially incorrect, unreliable, and inaccurate in order to assess the auditee's financial position and results of operations. Investors, lending institutions, and governments very rarely accept an auditee's financial statements if the auditor issued an adverse opinion, and usually request the auditee to correct the financial statements and obtain another audit report.

Example: Financial Statements are materially misstated Disagreement with management on provision for losses INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF XYZ BERHADReport on the Financial Statements We were engaged to audit the financial statements of XYZ Berhad, which comprise the balance sheet as at 31 December 20XX, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages AA to ZZ.

Directors Responsibility for the Financial Statements The directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. 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 about 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 judgments, 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 entitys preparation of financial statements that give a true and fair view 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 entitys 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 qualified audit opinion.

Basis for Adverse Opinion As described in Note GG to the financial statements, no provision has been made for losses expected to arise on certain significant long-term contracts currently in progress, as the directors consider that such losses should be off-set against amounts recoverable on other long-term contracts. Provision for foreseeable losses on individual contracts is required by FRS 111, Construction Contracts. Had such losses been provided for, the effects would have been to reduce profit before tax for the year and the contract work in progress by RMXXX, income taxes for the year by RMXXX and net profit for the year by RMXXX. Accordingly, retained earnings as of 31 December 20XX would also have been reduced by RMXXX.

Adverse Opinion In our opinion, because of the significance of the matter described in the Basis for Adverse Opinion paragraph, the financial statements do not give a true and fair view of the financial position of the Company as of 31 December 20XX and of its financial performance and cash flows for the year then ended in accordance with the Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia.

Report on Other Legal and Regulatory Requirements In accordance with the requirements of the Companies Act 1965 in Malaysia, we also report that in our opinion: (a) Because of the matter as described in the Basis for Adverse Opinion paragraph, the accounting and other records have not been properly kept in accordance with the provisions of the Act. (b) The registers required by the Act to be kept by the Company have been properly kept in accordance with the provisions of the Act.

Other Matters This report is made solely to the members of the Company, as a body, in accordance with Section 174 of 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.

(Audit Firm) [AF: 8888] Chartered Accountants

(Partner) [9999/9/99 (J/PH)] Chartered Accountant

Date [Location in the country]

Disclaimer of Opinion reportADisclaimer of Opinionis issued in either of the following cases: When the auditor is not independent or when there is conflict of interest. When the limitation on scope is imposed by client, as a result the auditor is unable to obtain sufficient appropriate audit evidence. When the circumstances indicate substantial problem of going concern in client. When there are significant uncertainties in the business of client.ADisclaimer of Opinion, commonly referred to simply as aDisclaimer, is issued when the auditor could not form and consequently refuses to present an opinion on the financial statements. This type of report is issued when the auditor tried to audit an entity but could not complete the work due to various reasons and does not issue an opinion. A disclaimer of opinion differs substantially from the rest of the auditor's reports because it provides very little information regarding the audit itself, and includes an explanatory paragraph stating the reasons for the disclaimer. Although the report still contains the letterhead, the auditee's name and address, the auditor's signature and address, and the report's issuance date, every other paragraph is modified extensively, and the scope paragraph is entirely omitted since the auditor is basically stating that an audit could not be realized.Example: Inability to obtain sufficient appropriate audit evidence Inadequate accounting records INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF XYZ BERHADReport on the Financial Statements We were engaged to audit the financial statements of XYZ Berhad, which comprise the balance sheet as at 31 December 20XX, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages AA to ZZ.

Directors Responsibility for the Financial Statements The directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on conducting the audit in accordance with approved standards on auditing in Malaysia. Because of the matter described in the Basis for Disclaimer of Opinion paragraph, however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.

Basis for Disclaimer of Opinion As discussed in Note GG to the financial statements, a fire at the Companys computer center destroyed many of the accounting records and related documents. The financial statements consequently include significant amounts based on estimates. We were unable to carry out appropriate audit procedures to obtain sufficient and appropriate audit evidence over these estimates. We could not determine the effect of adjustments, if any, on the financial position of the Company as at 31 December 20XX, or on its financial performance and cash flows for the year then ended.

Disclaimer of Opinion Because of the significance of the matter described in the Basis for Disclaimer of Opinion paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis of an audit opinion. Accordingly, we do not express an opinion on the financial statements. Report on Other Legal and Regulatory Requirements In accordance with the requirements of the Companies Act 1965 in Malaysia, we also report that in our opinion: (a) Because of the matter as discussed in the Basis for Disclaimer of Opinion paragraph, the accounting and other records have not been properly kept in accordance with the provisions of the Act. (b) The registers required by the Act to be kept by the Company have been properly kept in accordance with the provisions of the Act.

Other Matters 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.

(Audit Firm) [AF: 8888] Chartered Accountants

(Partner) [9999/9/99 (J/PH)] Chartered Accountant

Date [Location in the country]