By: Shannon Robinson, CPA- Senior Accountant
Reading an auditor’s report is not familiar territory for most people. In this blog, I will walk you through the four different types of opinions that an auditor can conclude at the end of an audit. Before we get into those, it is important to note that recently the auditor’s report was re-organized, and the auditor’s opinion is now the first paragraph of the report.
The four different opinions are as follows:
Unqualified: This type of opinion is often referred as a “clean” opinion. This is the most desired and most common opinion as it states that the entities financial statements are fairly presented and free of material misstatements.
Qualified: This type of opinion is usually given when the auditor finds material misstatements in the entity’s financial statements. Even though the financial statements contained material misstatements those misstatements do not mis-lead the reader of the statements.
Adverse: This type of opinion is given if material misstatements are found, and those misstatements may mis-lead the reader of the statements.
Disclaimer: Lastly, the least desired opinion, is given if the auditor is not able to obtain enough information to form an opinion on whether the financial statements are presented fairly and appropriately. Basically, the auditor couldn’t finish the audit and they fear the financial statements could have un-known misstatements that could be material and mis-lead the reader.
Next time you read an auditor’s report, check out what type of opinion the auditor gave and take that into consideration when forming your opinion of the entity as a whole.
The Holbrook & Manter A&A team would be happy to assist you with any of your audit needs. Reach out to us for more information.