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Standard Unqualified and Qualified Opinion in Audit

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Standard Unqualified and Qualified Opinion in Audit essay
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An audit opinion is a verification that accompanies financial statements based on an audit of the accountant’s opinion of the procedures and records used to provide the statements whatever of whether the financial statements have exist material misstatements. There are four types of audit opinion which are standard unqualified opinion, qualified opinion, adverse opinion and disclaimer of opinion.

Standard Unqualified Opinion

Standard unqualified opinion is also call as clean opinion. The auditor reports with a standard unqualified opinion is issued by an auditor when the financial statements are judged to be free from material misstatements and presented fairly in compliance with the Generally Accepted Accounting Principles (GAAP). Besides, standard unqualified opinion is given over the internal controls of an entity if management has stated responsibility for its establishment and maintenance, and the auditor has to carry out fieldwork to test its effectiveness. It is the best type of report that an auditee may be given from an external auditor.

The conditions for a standard unqualified opinion show the following:

  1. All financial statements that are statement of financial position, statement of comprehensive income, statement of retained earnings and statement of cash flows are included.
  2. The three general standards have been obeyed in all particular on the engagement.
  3. Sufficient evidence has been collected and the auditor has managed the engagement in a way that enables him or her to conclude that the three standards of fieldwork have been achieved.
  4. The financial statements are presented in compliance with Generally Accepted Accounting Principles (GAAP).
  5. There are no situations requiring the extra of an explanatory paragraph or modification of the wording of the report.

A standard unqualified audit report consists of a report title, audit report address, introductory paragraph, scope paragraph, opinion paragraph, name of CPA firm and audit report date. Auditing standards require that the audit title includes “independent” to carry to the user that the report was unbiased in all particular. The report is normally addressed to the company, its stockholders or the board of directors. The introductory paragraph is the first paragraph of the audit report states the audit work carry out and identifies the responsibilities of the auditor and management in relation to the financial statements. The second paragraph which is scope paragraph describes the scope of audit work and provides a general description of the nature of the work. The remainder briefly details important respect of an audit. The final paragraph as the opinion paragraph states express the auditor’s opinion on the financial statements and whether they are in compliance with Generally Accepted Accounting Principles (GAAP) based on the results of the audit. The name determine the CPA firm or practitioner who carry out the audit. The proper date for the report is the end of fieldwork when the auditor has obtained sufficient audit evidence to support the opinion.

Qualified Opinion

A qualified opinion is given when a company’s financial records have not complied with Generally Accepted Accounting Principles (GAAP). Even though the wording of a qualified opinion is very same to a standard unqualified opinion, the auditor provides an extra paragraph including exclusions from the fairness of the financial statements and indicates the reasons why the auditor report is not unqualified.

The circumstances which would cause an auditor to issue a qualified opinion over the standard unqualified opinion are:

  1. Scope of limitation – this type of qualification happens when the auditor could not audit one or more areas of the financial statements and even though they could not be taken evidence to verify. The remainder of the financial statements were audited and they comply with Generally Accepted Accounting Principles (GAAP).
  2. GAAP departure – this type of qualification happens when one or more areas of the financial statements do not compliance with Generally Accepted Accounting Principles (GAAP), but do not influence the remainder of the financial statements from being fairly represented when taken as a whole.
  3. The auditor is not independent. For example, the auditor have owns stock in the client’s business. This type of opinion may not be used if the auditor trusts the exceptions being reported upon are very material. Therefore, a disclaimer or adverse opinion would be applied under this circumstance.

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Standard Unqualified and Qualified Opinion in Audit. (2019, January 15). GradesFixer. Retrieved November 27, 2021, from
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