What Is an Auditor's Opinion?

An auditor’s opinion gives the management of a company or agency notice of problems found in financial statements, based on the auditor’s judgment in conjunction with generally accepted accounting principles. Audit reports might contain an unqualified, qualified, or adverse opinion, depending upon the findings. The auditor collects information from financial records to determine if it accurately represents management statements.

An unqualified auditor’s opinion is also called a clean opinion. It means the auditor found no circumstances that differ from disclosures made by management regarding profits and expenses. This opinion represents a true and accurate accounting in all pertinent areas. The unqualified opinion does not mean no errors exist; it merely indicates any mistakes are minor. Auditors typically accept a tolerable level of error, such as a minor omission.

The qualified auditor’s opinion might be issued when an unqualified opinion is inappropriate because of a dispute between management and the auditor’s findings. These differences are typically minor and might occur when the auditor cannot verify information. He or she might report the audit represents a true and fair picture of financial statements, except in a certain area.

If the auditor finds substantial disputes that change the financial position of the company, he or she might issue an adverse auditor’s opinion. This might occur when financial statements do not conform to generally accepted accounting principles. Misstatements in the company’s financial position and operational deficiencies are two examples typically reported as adverse opinions.

Sometimes an auditor will issue a disclaimer, which is not a true opinion. He or she might be unable to collect enough data to express an opinion in another category. This situation might occur if financial documents were accidentally destroyed and cannot be verified.

An auditor’s report lists the type of statements audited and the role of management in preparing documents for the examination. The auditor’s role in the process is also outlined, including the responsibility to follow professional standards in the industry. The summary of the auditor’s report might contain a final paragraph after the opinion to mention uncertainties that might affect future audits. Pending litigation with unknown results represents a potential financial impact to the firm.

In some areas, an annual, independent audit is required by law, especially for public agencies. This examination gives a true and accurate picture of how the agency handles money, and whether it complies with laws regulating these funds. The auditor looks for irregularities in financial statements that require correction.