There are various types of audit opinions, so they can easily be confusing for the non-finance and accounting manager. Due to the enormous amount of man-hours and costs associated with financial reporting, the SEC has left the financial reporting process for publicly listed companies to public accounting firms. Certain companies and types of organizations must hire an independent auditing organization, such as a public accounting firm familiar with financial audits, to perform an examination of company financial statements, as well as provide reasonable assurance that statements follow guidelines set out by the U.S. GAAP.
Components and Types of Audit Reports
Companies issuing securities to the U.S. public, in accordance with the Sarbanes-Oxley Act of 2002 (SOX), must have an audit performed. Audit reports consist of an Introductory section, Financial Section, required supplemental information, and findings and recommendations. Upon completion of an independent audit, the auditor will give one of 4 types of audit report opinions:
- Unqualified Opinion
- An unqualified opinion, sometimes referred to as a “clean report”, is the best possible type of report a business can receive. It means that an independent auditor attests that your company’s financial records are free of errors and are in accordance with Generally Accepted Accounting Principles (GAAP).
- Qualified Opinion
- Adversely, qualified opinions occur when there are matters that concern the auditor. An auditor will qualify an audit report when the subject matter of qualification affects the fairness and truthfulness of the financial statements. This type of opinion is often given to companies whose financial records haven‘t been properly maintained in accordance with GAAP, but no misstatements have been found. The auditor will include an additional paragraph on qualified reports stating the issues preventing the report from being unqualified.
- Disclaimer Opinion
- If a definitive opinion on your financial statements can’t be offered by the auditor, either due to lack of financial records or insufficient management support, a disclaimer opinion is given. Ordinarily, a disclaimer opinion states that an auditor was unable to complete a successful and accurate audit.
- Adverse Opinion
- Adverse opinions are to be avoided at all costs. An adverse opinion signals that financial records contain gross mistakes, or even fraud, and indicate that financial statements are not in line with GAAP. Moreover, the financial statements don’t accurately reflect the financial health and performance of the company.
Public Accounting Audit Firms
If your organization could stand to benefit from full-service audit planning, faster financial statement preparation turnaround time, and report assurance follow-ups, contact the The Baird Audit Group today. The Baird Audit Group’s public accountants focus exclusively on audit services for businesses, governments, and nonprofits throughout the Southeastern United States.
Call us today at 706-855-9500 or contact us online HERE to learn more about our attestation services.