Types of Audit Reports

Answer 1

Disclaimer of Opinion:

The auditor doesn't want to or can't give an opinion on whatevers being audited.

Reasons:

• A lack of independence, or material conflict(s) of interest, exist between the auditor and the auditee (SAS No. 26)
• There are significant scope limitations, whether intentional or not, which hinder the auditor's work in obtaining evidence and performing procedures (SAS No. 58);
• There is a substantial doubt about the auditee's ability to continue as a going concern or, in other words, continue operating (SAS No. 59)
• There are significant uncertainties within the auditee (SAS No. 79).

Adverse Opinion:

(The worse) When an auditor determines the financial statements are materially misstated, or as a whole don't conform with GAAP (Generally Accepted Accounting Principles)

Qualified Opinion:

The auditor finds 1 of 2 types of situations that don't comply with GAAP. The auditor determines the financial statements are presented fairly except for (the situation that doesn't comply).

Reasons:

• Single deviation from GAAP - occurs when one or more areas of the financial statements don't conform with GAAP, but don't affect the rest of the financial statements from being fairly presented when taken as a whole.
• Scope of limitation - occurs when the auditor couldn't audit one or more areas of the financial statements, and even though they couldn't be verified, the rest of the financial statements were audited and they conform GAAP.

Unqualified Opinion:

(The best) Everything presents fairly and, as a whole, is in accordance with GAAP.

There are 3 types of unqualified opinions:

standard unqualified; unqualified with modified wording (ex. other auditors besides the ones writing the report were used); and unqualified with ending explainatory paragraph (ex. there might be a going concern problem with the company under audit.)