Question

E’sure & Company are a firm of auditors that provide regular training to their staff particularly those that have recently joined the practice. Specific aspects of auditing are taught and examined as part of the training relating to audit reports.

Identify the FOUR different types of audit reports explaining of each type of audit report

Answer 1

Answers to questions

Four types of audit report are as follows:

1. Clean report
2. Qualified report
3. Disclaimer audit report
4. Adverse Audit report

Clean Report- unqualified opinion

An unqualified opinion is considered a clean report. An unqualified opinion doesn’t have any kind of adverse comments and it doesn’t include any disclaimers about any clauses or the audit process. This type of report indicates that the auditors are satisfied with the company’s financial reporting. The auditor believes that the company’s operations are in good compliance with governance principles and applicable laws. The company, the auditors, the investors and the public perceive such a report to be free from material misstatement.

Qualified report-Qualified opinion

hen an auditor isn’t confident about any specific process or transaction that prevents them from issuing an unqualified the auditor may choose to issue a qualified opinion. qualified opinions project a negative opinion about a company’s financial status. Auditors write up a qualified opinion in much the same way as an unqualified opinion, with the exception that they state the reasons they’re not able to present an unqualified opinion.

A common for reason for auditors issuing a qualified opinion is that the company didn’t present its records with GAAP.

Disclaimer Report-Disclaimer of opinion

When an auditor issues a disclaimer of opinion report, it means that they are distancing themselves from providing any opinion at all related to the financial statements. Some of the reasons that auditors may issue a disclaimer of opinion are because they felt like the company limited their ability to conduct a audit. Auditor not allowed to ask or collect evidence.As a result, it creates an adverse image of the company.

Adverse Opinion-Adverse Audit Report

The final type of audit opinion is an adverse opinion. Auditors who aren’t at all satisfied with the financial statements or who discover a high level of material misstatements or irregularities know that this creates a situation in which investors and the government will mistrust the company’s financial reports.An auditor’s adverse opinion is a big red flag. An adverse audit report usually indicates that financial reports contain gross misstatements and have the potential for fraud.