Definition of unqualified opinion
The judgment of an independent author that the financial records and statements of a company are presented appropriately and fairly and in accordance with the Generally Accepted Accounting Principles (GAAP) is called unqualified opinion. It is the most common type ofthe auditor’s report. Generally, when an independent auditor believes that a company’s financial statement is good and free from material misstatements, and then only an unqualified opinion is issued. It is different from qualified opinion in the sense that a qualified opinion is issued when the auditor finds something in the financial statement of the company which is a major concern.
What it generally means?
An unqualified opinion generally indicates the following points:
1. The financial statements of a company have been prepared to use GAAP principle,which is applied consistently.
2. The financial statements of a company are matched with the statutory rules, requirements and regulations.
3. There is sufficient disclosure of all material which is relevant to the appropriate presentation of the financial facts.
4. If there are some changes in the accounting principles or in the application method, then it has been properly checked and determined in the financial statement of the company.
The financial report usually consists of a title and a header, the main body, the signature and address of the auditor and the issuance date of the report. According to the US auditing standard, the title should include “independent” in order to convey the user that the report was fully unbiased in all respects. Three main paragraphs constitute the main body of the unqualified report with each of the paragraphs having a standard wording and individual purpose. However some auditors have made some modifications in the main body but not the wording so that they can differentiate themselves with other audit firms.
The first paragraph, which is referred as an introductory paragraph, shows the audit work which is performed, and responsibilities of the auditor are identified with respect to the financial statements. The second paragraph, also called scope paragraph will give the detailed description of the work and on the limitations that the audit faces on the basis of the nature of the work. The third paragraph, also called opinion paragraph states the opinion of the auditor on the financial statements, and if they follow the accounting principles.