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Accounting Information > Public Accounting > Expressing Opinions
Expressing Opinions

The auditorís opinion is the end result of an audit. Expressing an opinion does not mean that the auditor is guaranteeing the truthfulness of the audited financial statements. The opinion is expressed regarding whether or not the auditor has determined that the financial statements are fairly presented in accordance with generally accepted accounting principles.

 

The auditorís report must state whether the financial statements are presented in accordance with generally accepted accounting principles. The report must state whether the principles have been consistently observed in the current period in relation to the prior period. The disclosures in the financial statements are assumed to be reasonably adequate unless otherwise noted in the report. The report must either express an opinion on the financial statements or an assertion that an opinion cannot be expressed. In cases where an opinion cannot be expressed, the reasons must be stated in the report.

The best result for an audit is an unqualified opinion. Such an opinion states that the auditor followed generally accepted auditing standards, and that in their opinion the financial statements are fairly stated in accordance with generally accepted accounting principles. In situations when an unqualified opinion cannot be expressed, the auditor would either express a qualified opinion, disclaim an opinion, or express an adverse opinion.

There are three reasons for an auditor to issue a qualified opinion. The first cause would be when circumstances prevent the auditor from performing all necessary audit procedures to adhere to generally accepted auditing standards. An example of this would be when the auditor is not able to observe the inventory counting when inventory makes up a significant part of the total balance sheet. The second justification for a qualified opinion is when there is an uncertainty about the possible impact of a future event on the financial statements. An example of this would be when a lawsuit is pending against the entity. The third justification for a qualified opinion would be when it is discovered that some accounting techniques used by the client are not in accordance with generally accepted accounting principles, that GAAP is not followed consistently from one year to the next, or that all appropriate disclosures have not been made in the financial statements.

Under some circumstances, the scope of the audit may be so inadequate that the auditor is not able to express an opinion. In other cases, the uncertainty of a future event might have such a huge possible impact on the statements that the auditor refuses to express an opinion. In these cases, the auditor would disclaim an opinion and state the reasons for doing so.

If the auditor determines that the financial statements are not fairly stated in accordance with generally accepted accounting principles, the auditor expresses an adverse opinion. An adverse opinion will have a huge effect on readers of the financial statements. For this reason, the auditor only issues an adverse opinion when they feel that the departure from GAAP is too significant to express a qualified opinion.

Are you looking for someone to help you with your auditing, bookkeeping, accounting, or tax needs? Do you need someone to examine your financial statements? You have come to the right place! Try the CPA search feature on this website to find a qualified professional in your area to help you with all your tax and accounting needs.

 
 
 
 
 
 
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