What are the types of findings during an audit?

This article describes the different types of internal audit findings.  

Major Non-Conformance

A major non-conformance is the most severe that we will issue, and aligns roughly to the criteria a UKAS Accredited Certification Body would use.

Where the evidence suggests that there has been a complete breakdown in an area of your management system, or that something is missing entirely, a major non-conformance will be raised.  We recommend major non-conformities are corrected immediately.

We will also raise major non-conformities which we feel that if it occurred during an external audit, it would have the potential to delay or suspended your certification.  Part of the internal audit process is to identify these issues so they can be corrected with minimum impact on the organisation.

Minor Non-Conformance

If our auditors find isolated instances of a process not being followed, policy not adhered to or a control not applied, but the sample suggests this is generally applied, we may raise a Minor Non-Conformance.

Minor Non-Conformances can escalate to a major NonConformance if not corrected, as they generally indicate the beginnings of a problem.

A series of minor non-conformances within the same area of the management system might also escalate to a major non-conformance, if the auditor believes there is a root cause which has completely broken down.

Often minor non-conformances can be corrected by looking again at your process/control and raising awareness.

Observation

Sometimes there may be a weakness in a management system which has not yet caused a material impact to the organisation.  

Where these are identified the auditor will likely note it as an observation, allowing you to look into the issue and highlighting it as an area of attention for future audits.

Observations may escalate to a Minor Non-Conformance if not addressed.

Opportunity to Improve

While the impartiality and integrity of the audit is of primary importance, noting opportunities to improve can be used to highlight positive intentions of the auditee or other information which doesn’t form part of the audit opinion.

Fixing Problems: Corrective Action

Any non-conformances raised during an audit should be managed through your non-conformance/corrective action procedures, which should be compliant to the standard.

Investigating the root-cause of the issue is essential to ensure that you find an effective corrective action.

An audit report is an appraisal of a small business’s complete financial status. Completed by an independent accounting professional, this document covers a company’s assets and liabilities, and presents the auditor’s educated assessment of the firm’s financial position and future. Audit reports are required by law if a company is publicly traded or in an industry regulated by the Securities and Exchange Commission (SEC). Companies seeking funding, as well as those looking to improve internal controls, also find this information valuable.

Tip

There are four types of audit reports: and unqualified opinion, a qualified opinion, and adverse opinion, and a disclaimer of opinion. An unqualified or "clean" opinion is the best type of report a business can get.

Unqualified Opinion

Often called a clean opinion, an unqualified opinion is an audit report that is issued when an auditor determines that each of the financial records provided by the small business is free of any misrepresentations. In addition, an unqualified opinion indicates that the financial records have been maintained in accordance with the standards known as Generally Accepted Accounting Principles (GAAP). This is the best type of report a business can receive.

Typically, an unqualified report consists of a title that includes the word “independent.” This is done to illustrate that it was prepared by an unbiased third party. The title is followed by the main body. Made up of three paragraphs, the main body highlights the responsibilities of the auditor, the purpose of the audit and the auditor’s findings. The auditor signs and dates the document, including his address.

Qualified Opinion

In situations when a company’s financial records have not been maintained in accordance with GAAP but no misrepresentations are identified, an auditor will issue a qualified opinion. The writing of a qualified opinion is extremely similar to that of an unqualified opinion. A qualified opinion, however, will include an additional paragraph that highlights the reason why the audit report is not unqualified.

Adverse Opinion

The worst type of financial report that can be issued to a business is an adverse opinion. This indicates that the firm’s financial records do not conform to GAAP. In addition, the financial records provided by the business have been grossly misrepresented. Although this may occur by error, it is often an indication of fraud. When this type of report is issued, a company must correct its financial statement and have it re-audited, as investors, lenders and other requesting parties will generally not accept it.

Disclaimer of Opinion

On some occasions, an auditor is unable to complete an accurate audit report. This may occur for a variety of reasons, such as an absence of appropriate financial records. When this happens, the auditor issues a disclaimer of opinion, stating that an opinion of the firm’s financial status could not be determined.

What are the 5 elements of audit finding?

What are the 7 types of audit evidence?

What is a major finding in an audit?

What are the 5 types of audit reports?