What Is a Short-Form Report?
A short-form report is a brief summary of an audit that has been performed on a company's financial statements. The report usually precedes a company's summary balance sheet or financial statements when they are requested by another party. The short-form report often consists of two paragraphs.
The first paragraph describes the scope of the audit, which refers to what financial statements the auditor has examined. The second section gives the findings of the audit, which states the auditor's opinion on whether or not the financial statements of the company are factual and accurate. A short-form report may be used by itself or in conjunction with a more detailed long-form report or complete auditor's report when more information is requested.
- A short-form report summarizes an audit that an auditor has performed on a company's financial statements.
- Short-form reports are usually two paragraphs long and consist mainly of the auditor's opinion of the financial statements they reviewed.
- The first paragraph of the report is known as the "scope," providing a description of what the auditor has done. The second paragraph, known as the "opinion section," provides an account of the auditor's findings.
- The short-form report must comply with the requirements of the Securities and Exchange Commission (SEC) and the American Institute of Certified Public Accountants (AICPA).
- The auditor's final opinion on the condition of the financial statements can be either "qualified" or "unqualified."
Understanding a Short-Form Report
The short-form report is a condensed version of the long-form report, which provides additional information about an auditor's activity and opinion. The first paragraph of the short-form report, describing what the auditor has performed, is known as the "scope," and the second paragraph, describing the auditor's findings, is known as the "opinion section."
The long-form report includes all of this information but also contains any recommendations for the client, evaluations on the financial status of the company, as well as a percentage change in the accounts on the financial statements.
The short-form report is held to the reporting requirements outlined by the Securities and Exchange Commission (SEC) and the American Institute of Certified Public Accountants (AICPA). In general, a short-form report saves money because it takes the auditor less time to prepare.
Unqualified Opinion vs. Qualified Opinion
The short-form report's brief length may not be sufficient to provide all desirable information if the auditor issues any opinion other than "unqualified." An unqualified opinion means the auditor feels the financial statements are accurate and meet generally accepted accounting principles (GAAP) standards and other statutory requirements.
A qualified opinion means the auditor feels the financial statements are overall accurate, but there were a few issues. It is not a clean bill of health. However, when a qualified opinion is issued, it does not mean the issue necessarily compromises the accuracy of the accounting data. When an issue is prevalent enough to compromise the accuracy of the accounting data, the auditor issues either a disclaimer or adverse opinion.