Independent Audit Report - Free Sample

Introduction

Independent audit reports give auditor's opinions on the firm's compliance with the accounting principles. The creditors and banks require the report before extending loans to companies. This report is usually attached to the firm's annual report. Kuwait Finance House is a public company based in Kuwait, with subsidiaries in Germany, Turkey, Bahrain, and Malaysia. This paper summarizes the Kuwait Finance House's independent auditor's report for the year ended 31st December 2019.

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Financial Statements

The report was completed by Barder A. Al-Wazzan and Waleed A. AL Osaimi. The audit gave an unmodified opinion on the group’s financial consolidated statements. According to Piri (2018), auditors give unmodified opinions are contented that the financial statements comply with the applicable laws and frameworks. The auditor’s opinion indicated that the books of the account had been properly kept. The opinion also showed no violations of law relating to organizational banking, currency, and the Central Bank of Kuwait.

Kuwait Finance House (2019) outlined that the administration is accountable for preparing and presenting the authorities' consolidated financial statement. The management is also bound to ensure that the preparation of the statements mentioned above is free from misstatement resulting from errors or fraud. Besides, the administration is also responsible for evaluating its ability to sustain its going concern and reveal any necessary information concerning the going concern. Moreover, management is accountable for supervising the organization's financial reporting procedure.

Professional Assessment

According to Kuwait Finance House (2019), the auditors should maintain professionalism and exercising professional assessments throughout the audit process. Secondly, the auditors are responsible for identifying and evaluating risks from the consolidated financial statements' falsity arising from either errors or fraud. Thirdly, auditors should assess the effectiveness of the applied accounting systems and the reasonability of the accounting estimations released by the management. Furthermore, auditors should ensure the efficiency of the managements' use of going concern as an accounting principle. Besides, auditors are bound to evaluate the structure, content, and presentation of the financial accounts. Lastly, the auditors are accountable for obtaining necessary audit evidence concerning business activities and the commercial information entities.

Kuwait Finance House (2019) defined the critical auditing matters as the most significant matters in auditing the consolidated financial accounts based on the auditors' professional judgment. The auditors considered several issues concerning the consolidated financial statements of Kuwait Finance House. Firstly, the auditors reviewed the credit losses associated with Islamic financing to customers. The auditors found that the credit losses connected to the Islamic Financing customers were higher than the expected credit loss. Secondly, the audit evaluated the impairment of joint ventures and associates. The evaluation involved studying the management's methods of recognizing impairment triggers, including notable adverse changes in the market, technology, legal or economic environment. Another critical audit matter was the impairment test for trading and investment properties. The impairment test involved the assessment of the real estate properties based on valuation models.

Conclusion

Furthermore, the audit considered "Islamic derivative financial instruments." The consideration necessitated the valuation of profit rate swaps, swaps, forward commodity contracts, and foreign exchange. The assessment was done by evaluating recognition, measurement, and management of the derivatives, as mentioned earlier, to confirm their effectiveness.

References

Kuwait Finance House, 2019. Annual Report: Kuwait Finance House (K.S.C.P.) and Subsidiaries

Piri, P., 2018. Evaluation of the Relationship between the Type of Independent Auditor's Opinion and Earnings Quality.