The audit opinion is the statement that appears at the end of the financial statements, in which the independent auditors express whether, based on their audit, the financial statements fairly present the company’s financial position and the results of its operations for the period reported.  While the audit opinion conforms to standardized wording, and is generally very similar for all publicly reported companies, there are different opinions that can be expressed.

Material Misstatements

First, the audit opinion will identify the reporting entity, the financial statements presented, and the period(s) covered by the statements.  The opinion also normally makes reference to the fact that the financial statements are the responsibility of management, meaning that the auditors did not prepare the statements – they performed an audit and are giving their opinion on the fairness of the statements.  This is generally interpreted to mean whether the financial statements are free of “material misstatements” that could affect the reader’s reliance on the information presented in the statements.

Auditing Standards

The opinion will make reference to the applicable auditing standards that applied, the most common of which would be generally accepted auditing standards in the United States or another country, or international auditing standards.  This part of the opinion will go on to briefly describe what those standards require, including obtaining “reasonable assurance”, examining evidence “on a test basis”, “assessing the accounting principles used and significant estimates made by management”, and “evaluating the overall statement presentation”. The auditors will then express that they believe their audits “provide a reasonable basis” for their opinion.