Types of audit opinions
INTERNATIONAL standards on auditing provide for the auditor’s responsibility to issue an audit opinion on the financial statements as an ultimate output of any audit process. The opinion should give investors reasonable reassurance that the financial statements are free from any errors, non-disclosures and non-compliance with set accounting policies.
Any errors or omissions are said to be material if they would affect the users’ decisions. The auditor would then determine the significance of the error or omission.
Unqualified opinion — is issued when the auditor has obtained all information and concludes that the financial statements have been prepared in full compliance with applicable financial reporting frameworks.
Where it is necessary the auditor may write an emphasis of matter paragraph to draw attention of financial statement users’ on important matters.
Qualified opinion — is a statement showing that either: the auditor was unable to obtain sufficient appropriate evidence on which to base an opinion and / or the financial statements have errors or omissions. Consequently, the auditor concludes that the possible effects on the financial statements are material and affect investors’ decisions.
Disclaimer opinion — the Auditor fails to obtain sufficient appropriate audit evidence on which to base his / her opinion.
The auditor therefore concludes that due to limited evidence, errors and omission in the financial statements could significantly affect investors’ decisions.
Adverse opinion — the auditor obtains sufficient evidence concluding that the financial statements have notable errors and omissions. Therefore the auditor also considers that this would significantly affect investors’ decisions. An adverse opinion is the most unfavourable audit opinion.
Remember, informed investors always pay attention to the nature of audit opinions given.
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