Opinion

There are basically four types of audit opinions that can be expressed, with a variation on the first, when applicable:

1. Unqualified
   1. Unqualified with additional explanatory text
2. Qualified
3. Adverse
4. Disclaimer

Unqualified Opinion

An unqualified, or “clean” opinion means that the financial statements are fairly presented in the auditors’ opinion, are free of material misstatements, and have been prepared in accordance with generally accepted accounting principles, consistently applied.  If the statements have been prepared on a basis other than generally accepted accounting principles (GAAP), the opinion should indicate this basis.  This could be the case for financial statements that are prepared to meet a specific governmental, regulatory, or other requirement.

If the auditors feel it is necessary to include additional explanatory information in the body of the opinion itself, they will generally include a separate paragraph summarizing this disclosure.  Provided they still issue an unqualified opinion, this additional explanation is for purposes of greater clarity and does not detract from the unqualified opinion as to the fairness of the financial statements.

Qualified Opinion

A qualified opinion will include an “except for” clause or similar wording to express that the auditors have taken exception to a certain accounting application or treatment, or were unable to establish the potential outcome of an uncertainty, which could have a material effect on the financial statements.  A qualified opinion will include a separate paragraph explaining the reason for the qualification.  This type of opinion is intended to call attention to a certain issue, that prevented the auditors from issuing a clean opinion.

Adverse Opinion

In an adverse opinion, the auditors are clearing stating their opinion that the financial statements are not fairly presented in accordance with the accounting and reporting principles intended, or that there are material misstatements.  There will be a paragraph explaining the reason for their negative opinion.