Types of Audit Opinions

Lesson

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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.

Question

You're an auditor attempting to explain your audit of Pepper corp..

This is what you've been told:

One of the firm's major buyers appears to be financially unstable, and an adequate update to the allowance for doubtful accounts had not been made.

What is the most likely opinion to be provided for this audit?

Answer

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👉 Answer:

Qualified opinions are given to financials that are presented fairly with one exception.