Question

What are the four types of audit opinions and list the two main conditions that would require modifications to the auditor’s standard report.

Answer 1

At the end of statutory audit the auditor issues an audit report containing auditor's view on the financial statements of the company. Verification of the books of account and other relevant fact,helps the auditor to form an opinion. Following are four types of opinion that an auditor would form:

Unqualified or Unmodified opinion: Such an opinion is expressed by an auditor when he is of the view that financial statements of the company express true and fair view of company's financial standing. Such an opinion indicates that financial reports are prepared on the basis of generallly accepted accounting principles.

Qualified opinion or modified opinion: Such an opinion is expressed when auditor's report is modified to add emphasis or highlight the matter affecting financial statements. The major reason behind expressing such view is if it concerns the auditor regarding going concern of the business.

Adverse or disclaimer opinion: If there are limitations on the scope of auditor's work or if there is disagreement with the management regarding acceptability accounting principles,etc

Adverse opinion: Such agreement is expressed when the possible effect of disagreement is so material or pervasive to the financial statement that the auditor concludes that qualification of audit report is not adequate to disclose the mialeading or incomplete nature of financial statement.

Requirements to modifications to the auditor report:

If there are concerns to auditor regarding going concern problem,and

Going concern problem is not resolved and the adequate disclosures have not been made in the financial statement.