Meaning and definition of Audit Opinion
An audit opinion refers to a certification accompanying financial statements and is provided by the independent accountants involved in auditing of a company’s books and records in addition to being helpful in creating the financial statements. The audit opinion is helpful in setting out the scope of the audit, the accountant’s opinion about the procedures and records used for creating statements, and the accountant’s opinion about whether or not the financial statements present an accurate reflection of the organization’s financial condition.
Types of Audit Opinions
As stated by Investopedia, there are usually four types of audit opinions. Each of these audit opinion types represents an official opinion that is used by internal and external business stakeholders to make significant business decisions. The different types of audit opinions are explained below:
An unqualified audit opinion signifies that auditors could find no noteworthy violations or misstatement in a company’s financial info. This opinion is also referred as ‘clean opinion’. Normally, this report is written by the auditors with reference to the company’s ability for recording financial info as per GAAP. Besides, the report might also include a pithy summary about the process of conducting audit and the info that was reviewed.
A qualified audit opinion implies that auditors discovered issues in a company’s financial info. These issues are involved in preventing the auditors from issuing a clean opinion on the company’s operations.
- Adverse opinion
An adverse opinion is one of the two radically negative audit reports. An adverse opinion signifies that the auditor discovered significant material misstatements associated with financial information. These misstatements generally refer to the financial statements not conforming to GAAP and that the info is inaccurate and unreliable.
- Disclaimer opinion
A disclaimer audit opinion is the most awful audit report that can be received by a company. The disclaimer letter is issued by the auditor to specify that they are not able to form an opinion on the company’s financial statements. This disclaimer opinion might occur as a result when an auditor lacks independence from the client thus leading to the inability of the auditor in forming a clear, third-party opinion on the company’s financial info.