Question

Unqualified Opinion

Qualified Opinion

Adverse Opinion

Disclaimer Opinion.

Include the following:

Describe the scenarios under which each of these audit opinions

How do investors react to these different audit opinions

Provide examples of real organizations for each of these opinions

What are the consequences or benefits an organization may encounter as a result of each of these opinions

Provide examples of real organizations for each of these opinions

Answer 1

1)UNQUALIFIED OPINION -An opinion is said to be unqualified when the auditor concludes that the finanancial statements give a TRUE AND FAIR VIEW in accordance with the financial reporting framework used for the preparation and presentation of the financial statements.

The auditors gives a clean or UNQUALIFIED REPORT when he does not have any significant reservation in respect of matters contained in the Financial Statement.

2)QUALIFIED OPINION-A qualified audit report is one where an auditor gives an opinion subject to certain reservations. the auditors reservation is generally stated as,"subject to the above ,we report that the balancesheet shows a true and fair view."

a qualified opinion is expressed when auditor conclude that -

a) an unqualified opinion can not be expressed.

b)the effect of any disagreement with management is not so material and pervasive as to require an adverse opinion,or

c)the limitation on scope is not so material and pervasive as to required a disclaimer of opinion.

3)ADVERSE REPORT-An adverse report is given when auditor concludes that based on his examination ,he does not agree with the affirmation made in the financial statements/report.

the auditor states that the financial statements dont present a true and fair view of the state of affairs and the working results of the organisation.

4)DISCLAIMER OPINION-A disclaimer of opinion report is given when the auditor is unable to form an overall opinion about the matters contained in the financial statements. a disclaimer of opinion should be expressed when the possible effect of a limitation on scope is so material and pervasive that the auditor has not been able to obtain sufficient and appropriate audit evidence and is accordingly unable to express an opinion on the financial statements.

investors reaction on-

unqualified audit report- they beleive in investing in future too and create a good image of organisation intheir mind.and believe in going concern concept.

qualified opinion-investors assume that going concern is affected and they dont trust the same entity

adverse opinion-investors are not intrsted to remain with such organisation.

disclaimer of opinion-investor do not create a clear negative image in their mind but they may feel risk to invest in such a company.

example of organisation who gave-

a)unqualified-reliaance india

b)qualified-hindustan construction company ltd.

c)adverse-victory paper and board (india)

d)disclaimer-classic diamonds (india)

CONSEQUENCES OF-   

TYPES OF AUDIT REPORT

UNQUQLIFIED-THEY PROVIDE REASONABLE ASSURANCE TO THE USERS THAT FINANCIAL STATEMENTS ARE FREE FROM ANY MATERIAL MISSTATEMENT.

QUALIFIED-THEY TELL THE USERS THAT FINANCIAL STATEMENTS ARE EITHER PARTIALLY OR FULLY UNREALIABLE.

ADVERSE - THEY ALSO TELLS THE USERS THAT FINANCIAL STATEMENTS ARE EITHER PARTIALLY OR FULLY UNREALIABLE AND RESPECTIVELY HAVE SOME DISADVANTAGES.

DISCLAIMER-THEY DONT PROVIDE NEGATIVE REPORT BUT SOME SITUATION OR CIRCUMSTANCES WHERE AUDITOR COULD NOT PERFORM HIS DUTY ON SOME GROUND DUE TO LIMITATION ON HIS WORK.SO USERS CAN PARTIALLY TRUST SUC ORGANISATION.

EXAMPLE -SAME AS MENTIONED ABOVE