Question

Analyze the various types of auditor’s reports, and determine the impact that the auditor’s report has on a company’s ability to obtain financing from a bank. Identify the type of auditor’s report issued on Verizon, and speculate the manner in which you believe banks will perceive Verizon’s auditor’s report.

Answer 1

There are basically four type of reports an auditor can issue after conducting an audit:

1.Unqualified opinion

It is an audit report that is issued when an auditor determines that each of the financial records provided by the small business is free from misrepresentation . It asserts that financial records have been maintained in accordance with the standards known as GAAP. This reports reinforces the strength and ability of the organization to access loans using the audited financial reports. It also increases the faith of investors toward the firm.

2.Qualified opinion

The auditor issues this report on a company financial records have not been maintained in accordance with GAAP but no misrepresentation are identified. The auditor highlight reasons for issuing such a report and the bank relying on due diligence of the auditor can rely on that report to either grant a loan or not. However, chances are always limited.

3.Adverse opinion

It is a report that indicates that the firm’s financial records do not conform to GAAP. Additionally there exist gross misrepresentation (Hartman, 2007). It may occur as an error but on the other hand it may indicate fraud in a company and thus a company have very minimal chances of getting loans approved by banks.

4.Disclaimer of opinion:

This one arises when an auditor is unable to complete an accurate audit report which may occur for a variety of reasons such as absence of appropriate financial records. It is another kind of report that a firm cannot access loan with it.

The report issued by the auditors on Verizon Communications is unqualified one. The banks can have a reliance on this report because the auditing was done by recognized auditing firm globally. The Ernst and Young LLP. New York