There are several types of audit report that contains the views of the Auditors on the monetary statements of the business, near the ending of any statutory audit. The entire report of the audit is summarized in the opinion of the audit since the audit is normally an engagement of the verification of the accounts book of any entity. The verification of the accounts book and similar relevant topics are very important since they help with the formation of the auditor and the opinions. It is also the main basis of the expression of the opinions. There are mainly four types of audit report and this article will try to detail them accordingly.
Unmodified Opinion or the Unqualified Opinion
The unmodified opinion or the unqualified opinion is a type of opinion that has been expressed by the auditor. In this case, the auditor concludes if the financial statements provide a fair and true opinion of the financial stance of the company and if they are in accordance with the framework of the financial reporting that has been used for the presentation and preparation of such financial statements. Moreover, an unmodified opinion also gives the following indications.
- All the principles related to accounting are adopted accordingly
- Preparation of the financial statements are done based on the typically accepted principles of accounting
- The financial statement follow along the relevant requirements and regulations, which are, statutory in nature.
- There is enough information regarding all the material elements which are relevant to the correct representation of the financial data.
Modified Opinion or the Qualified Opinion
If the Auditors modify the financial statements in order to enhance of emphasize a certain aspect which affects the statements, then those types of audit report are called modified opinion. They are also known as the qualified opinion. There can be several reasons to modify or to qualify an audit report but one of the main reasons of such an action is if there are any occurrence to the auditor which may lead to a going concern disadvantage. Furthermore, if that going concern problem does not get resolved and enough information is not given in the final financial statements can lead to the modification of the audit report. An example of such modified audit report will generally have the following statement in them. The following is a verbatim quote.
“Without qualifying our opinion, we draw attention to Note II of the Schedule to the financial statements. The entity is defendant in a lawsuit alleging patent infringement. The ultimate outcome of the matter cannot presently be determined, and no provision for any liability that may result has been made in the financial statements.”
Disclaimer or Adverse of Opinion
A disclaimer or an adverse opinion can be issued for the following conditions.
- If there occurs some limitation within the scope of the work of the auditor
- If there is some form of disagreement with the management who is in charge of the acceptability of the selected policies of the accounts
- Process of those application
- Adequacy of the disclosure of the financial statement
When an opinion gets issued by an auditor, especially of the adverse or a disclaimer of any opinion, then a transparent disclosure of all the substantial causes have to be added within the report of the audit.
Disclaimer of Opinion
The type of opinion that is issued when the auditor is incapable of obtaining enough correct audit evidence due to the limitations found in the scope of such audit is called the disclaimer of an opinion and it is normally expressed by the auditor.
The viable effect following a disagreement with the management may get very pervasive and material to the point that the financial statements require a conclusion by the auditor with a qualification of the audit report is deemed to be inadequate to disclose, then the opinion which gets issued by the auditor is called an adverse opinion. These types of audit report may mislead or deem as the incomplete stature of the financial statements.
Visit Company Vakil for any legal registration.