Types of Audit Opinions

Lesson:

Audits involving looking at financial statements and figuring out if they're reliable.

At the end of an audit, the financials receive one of four types of opinions from the auditor:

  • Unqualified Opinion - The auditor believes that the financials have been presented fairly. This is the evaluation that investors like the most.
  • Qualified Opinion - The auditor believes that the financials have been presented fairly, except for one item.
  • Adverse Opinion - The auditor does not believe that the financials have been presented fairly. This can be catastrophic for the organization being evaluated.
  • Disclaimer of Opinion - The auditor cannot express an opinion, due to an inability to complete the audit in an impartial manner. In some cases, the disclaimer of opinion may be the result of factors entirely outside of the control of the audited firm.
You've been asked to testify about your audit of Sierra inc..

Here are the relevant facts:

  • The auditors discovered that the majority of the firm's revenues were the result of fictitious sales.
What will the result of this audit be?

Answer:

  • That engagement resulted in an adverse opinion.

Explanation:

    Adverse opinions are given to financials that are not presented fairly.
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