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What is an Audit?
An audit process is a review of the business’s financial statements.
The purpose of this review is to allow an independent person, usually a qualified and certified auditor, to express an opinion, on the correctness, as well as the fairness, of the presented financial statements.

In this video, we will be providing an overview of the types of the audit opinions that an auditor can provide.

0:00 Introduction
0:26 Welcome to Our Channel
0:35 What is An Audit Opinion
1:08 4 Types of Audit Opinions
1:32 Unqualified opinion
2:05 Qualified opinion
2:32 Disclaimer of opinion
3:00 Adverse opinion
3:27 Importance of Audit Opinion

What is an Audit Opinion?
An auditor's opinion is basically a certification that accompanies financial statements.

This certification, or review, essentially provides a summarised picture, to the users of the financial statements, that the presented financial statements, are indeed, a true and fair reflection, of the financial affairs of the business.

The review provided as an opinion by the auditor, and is expressed in an audit report.

There are four types of audit reports

Let us look at each audit opinion in more detail

An unqualified or "clean" opinion is the best type of report a business can get.

This opinion is issued, when an auditor, determines that, the financial statements provided by the business, are free of any misrepresentations.

This type of opinion, indicates that the auditor, is materially satisfied, with the financial reporting.
This is the best type, of audit opinion that a business can receive.

When an auditor is not confident about the process or the transaction that prevents them from issuing an unqualified, or clean, report, then the auditor would issue a qualified opinion.

This is when an auditor make a conclusion, after the audit process, that the financial statements are materially misstated. However, those misstatements are not pervasive.

In the event that the auditor is unable to complete the audit report, either, due to the absence of financial records, or insufficient co-operation from management, the auditor issues a disclaimer of opinion. This is referred to as a scope limitation and is an indication that no opinion over the financial statements was able to be determined. A disclaimer of opinion is not an opinion itself.
This is when an auditor distance themselves from providing any opinion at all related to the financial statements.

The final type of audit opinion, is an adverse opinion. An adverse opinion is issued, where the auditor concludes, that the financial statements, are materially misstated, and may indicate, that there are also irregularities in the financial affairs of the business.

This type of opinion is a red flag and communicates the message that financial statements should not be relied on.

In conclusion. The audit opinion is very important for stakeholders because it lets them know whether or not the information in the financial statements is correct and whether or not the financial statements can be relied on for decision making.

This has been a short, informative video, proudly brought you, by KANO consultants.
For professional advice, you can trust.

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Disclaimer:
This publication and the information included in it are not intended to serve as a substitute for consultation with a professional. Specific issues, concerns and conditions always require the advice of an appropriate professional advisor. The use of the contained information is at the user's own discretion.