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An unqulified opinion has 3 paragraps
1st paragraph – identifies the financial statements and indicates the responsibility of both the management and the audit firm.
2nd paragraph – describes the audit and the work of the auditor
3rd paragraoh – indicates whether resonable assuarance is being given that the financial statements are presented fairly in all material respects in accordance with generally accepted acconting principals.
could some one please shed more light on audit opinions!Look LUKOBA, there are THREE types of Audit Opinions:
1. Qualified
2. Adverse
3. DiscalimerNow to tell you that when do we give which type of Opinion.
Qualified opinion is given in TWO cases:
When we are giving Modified Report and the report is given as modified because of;
Either (a) The Financial Statements were not free from material misstatements. And the matter which came into view was Material.
Or (b) The Auditor was not able to collect Sufficient Appropriate audit evidence and the reason was Material.Adverse opinion is given when the auditor is giving a Modified report because he thought that the financial statements were not free from material misstatements and the mistakes are more than one, i.e Material and Pervasive.
Disclaimer opinion is given when the auditor is giving a Modified report because he was not able to identify sufficient appropriate audit evidence and the reason was Material and Pervasive.
Errr, why was i getting confused answering it, maybe i din’t get your question right. Sorry if that is the case :S
There might be some confusion between the audit report and the audit opinion. A modern audit report is a lengthy document – typically around one page of printed A4 paper. It says, amongst other things what the financial statements consist of, what the directors are responsible for, what the auditors do (and warnings that they use a test basis to give only reasonable assurance that there are no material misstatements etc etc). At long last the opinion paragraph appears. The opinion can be:
1 Unmodified (ie the accounts show a true and fair view)
2 Modified.The modified versions are:
1 An emphasis of matter is included in the opinion paragraph. This refers to something that is already properly disclosed in the accounts. This is not a qualification: if the matter has been properly disclosed there is no criticism of the FS, but the auditor wants to ensure that users don’t overlook something. For example, the emphasis of matter sentence could be referring to a note in the accounts explaining something like pending litigation where the outcome is uncertain. Or it could refer to an important non-adjusting event that occurred after the period end.
As defined by the UK Financial Reporting Council, an emphasis of matter paragraph is:?“A paragraph included in the auditor’s report that refers to a matter appropriately presented or disclosed in the financial statements that, in the auditor’s judgment, is of such importance that it is fundamental to users’ understanding of the financial statements.”?
The remaining modified opinions are qualifications. The two types of qualification are now:? 1 That the FS contain a material misstatement (previously known as disagreement)? 2 That the auditors have not been able to obtain sufficient appropriate audit evidence (previously known as limitation in scope).?
If the accounts contain a material misstatement, the auditor has to decide if this will result in an ‘except for’ qualification or an adverse qualification (“the FS do not show a true and fair view”).
If the auditor has not been able to obtain sufficient appropriate audit evidence, then the auditor has to decide whether an ‘except for’ qualification or a disclaimer (“we can form no opinion on the FS”) is more appropriate.
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