06 Jan Audit Opinion
An auditor’s opinion is a statement made by the auditor based on the company’s financial statements and covers the company’s assets and liabilities. Audit opinions are crucial for stakeholders because it lets them identify whether or not the information provided on the financial statements are correct or not. This type of report is valuable to those businesses who are seeking funding, as well as those who intend to improve internal controls.
Audit opinions are categorized into four types:
- Unqualified Audit opinion
- Qualified Audit Opinion
- Adverse Audit Opinion
- Disclaimer Audit Opinion
Unqualified Audit Opinion
This type of audit opinion is also referred to as a clean opinion. It is issued when the auditor is confident that the financial records presented by the company is free from any misinterpretations. This audit opinion is considered as the best type of report a business can have.
Qualified Audit Opinion
Qualified audit opinion is a type of audit opinion where auditors come up with a conclusion that there is material misstatement discovered in the financial statements– however, these are pervasive misstatements does not affect the financial statements and users decision making. In most cases, auditors may issue a qualified audit opinion on the opening balance of financial statements if the past year’s financial statements were not audited by them.
This audit opinion is considered as the worst type of audit opinion or report that can be issued to a business. This implies that the business’ financial statements are grossly misinterpreted and are often an indication of fraud. When this type of audit opinion is issued, a business must correct its financial statement and reaudit may be necessary as investors, lenders and other requesting parties will definitely not accept it.
Disclaimer Audit Opinion
Disclaimer audit opinion is different from both Adverse and Qualified audit opinions. This type of audit opinion is issued by the auditor once financial records cannot be obtained or accessed after negotiating with the client (and the client rejects whether intentional or intentional)— it is presumed that those items they are not able to access or obtain information can be misstated and pervasive.
Audit opinions provides assurance that company funds are appropriately managed, thus, creates a positive impression to investors and creditors. By evaluating financial statements and accounting records, auditors can verify whether the company’s financial statements reflects the company’s financial profile accurately.