<\/p>\n
Audit opinions differ depending on the information available, financial viability, errors discovered during audit procedures and other limiting factors. The type of opinion your auditor issues tells stakeholders whether you\u2019re in compliance with accounting rules and likely to continue operating as a going concern.<\/p>\n
The basics<\/p>\n
To find out what type of audit opinion you\u2019ve received, scan the first page of your financial statements. Known as the \u201caudit opinion letter,\u201d this is where your auditor states whether the financial statements are fairly presented in all material respects, compliant with Generally Accepted Accounting Principles (GAAP) and free from material misstatement. But the opinion doesn\u2019t constitute an endorsement or evaluation of the company\u2019s financial results.<\/p>\n
Most audit opinion letters consist of three paragraphs. The introductory paragraph identifies the company, accounting period and auditor\u2019s responsibilities. The second discusses the scope of work performed. The third paragraph contains the audit opinion.<\/p>\n
In general, there are four types of audit opinions, ranked from most to least desirable.<\/p>\n
1. Unqualified. A clean \u201cunqualified\u201d opinion is the most common (and desirable). Here the auditor states that the company\u2019s financial condition, position and operations are fairly presented in the financial statements.<\/p>\n
2. Qualified. The auditor expresses a qualified opinion if the financial statements appear to contain a small deviation from GAAP, but are otherwise fairly presented. To illustrate: An auditor will \u201cqualify\u201d his or her opinion if a borrower incorrectly estimates warranty expense, but the exception doesn\u2019t affect the rest of the financial statements.<\/p>\n
Qualified opinions are also given if the company\u2019s management limits the scope of audit procedures. For example, a qualified opinion may result if you deny the auditor access to a warehouse to observe year-end inventory counts.<\/p>\n
3. Adverse. When an auditor issues an adverse opinion, there are material exceptions to GAAP that affect the financial statements as a whole. Here the auditor indicates that the financial statements aren\u2019t presented fairly. Typically, an adverse opinion letter contains a fourth paragraph that outlines these exceptions.<\/p>\n
4. Disclaimer. Even more alarming to lenders and investors is a disclaimer opinion. Disclaimers occur when an auditor gives up midaudit. Reasons for disclaimers may include significant scope limitations, material doubt about the company\u2019s going-concern status and uncertainties within the subject company itself. A disclaimer opinion letter briefly outlines the auditor\u2019s reasons for throwing in the towel.<\/p>\n
Ready, set, audit<\/p>\n
Before fieldwork starts for the audit of your 2018 financial statements, let\u2019s discuss any foreseeable scope limitations and possible deviations from GAAP. Depending on the situation, we may be able to recommend corrective actions and help you proactively communicate with stakeholders about the reasons for a less-than-perfect audit opinion.<\/p>\n
\u00a9 2018<\/p>\n","protected":false},"excerpt":{"rendered":"
Audit opinions differ depending on the information available, financial viability, errors discovered during audit procedures and other limiting factors. The type of opinion your auditor issues tells stakeholders whether you\u2019re in compliance with accounting rules and likely to continue operating as a going concern. The basics To find out what type of audit opinion … Continue reading “Audit opinions: How your financial statements measure up”<\/span><\/a><\/p>\n","protected":false},"author":3,"featured_media":846,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-847","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-accounting"],"_links":{"self":[{"href":"https:\/\/www.excelsisaccounting.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/847","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.excelsisaccounting.com\/blog\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.excelsisaccounting.com\/blog\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.excelsisaccounting.com\/blog\/index.php\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.excelsisaccounting.com\/blog\/index.php\/wp-json\/wp\/v2\/comments?post=847"}],"version-history":[{"count":2,"href":"https:\/\/www.excelsisaccounting.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/847\/revisions"}],"predecessor-version":[{"id":854,"href":"https:\/\/www.excelsisaccounting.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/847\/revisions\/854"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.excelsisaccounting.com\/blog\/index.php\/wp-json\/wp\/v2\/media\/846"}],"wp:attachment":[{"href":"https:\/\/www.excelsisaccounting.com\/blog\/index.php\/wp-json\/wp\/v2\/media?parent=847"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.excelsisaccounting.com\/blog\/index.php\/wp-json\/wp\/v2\/categories?post=847"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.excelsisaccounting.com\/blog\/index.php\/wp-json\/wp\/v2\/tags?post=847"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}