Unmodified opinion on group financial statements. This circumstance involves a situation in which two or more CPA firms are involved in the audit of components of group financial statements (e.g., the component auditors may audit one subsidiary of an organization structured as a parent company with five subsidiaries). When the audit firm that does the remainder of the audit does not wish to take responsibility for the work of the component auditors, the audit report is modified to divide responsibility between the CPA firms. This situation is unique in that the report alterations do not involve inclusion of an emphasis-of-matter or an other-matter paragraph. Modified Opinions Page 666 Qualified opinion. A qualified opinion states that the financial statements are presented fairly in conformity with generally accepted accounting principles “except for” the effects of some matter. Qualified opinions are issued when the financial statements are materially misstated (“a departure from GAAP”) or when the auditors are unable to obtain sufficient appropriate audit evidence on which to base the opinion (“a scope limitation”). In both cases, the likely effects, while material , are not considered pervasive . All significant reasons for the issuance of a qualified opinion should be set forth in a basis for modification paragraph (expanatory paragraph under PCAOB standards) that precedes the opinion paragraph.
conformity with generally accepted accounting principles. Auditors issue an adverse opinion when the deficiencies in the financial statements are both material and pervasive. All significant reasons for the issuance of an adverse opinion should be set forth in a basis for modification paragraph that precedes the opinion paragraph. Disclaimer of opinion. A disclaimer of opinion most frequently is the result of a scope limitation that creates a situation in which the auditors are unable to obtain sufficient appropriate audit evidence on which to base the opinion, and they conclude that the possible effects on the financial statements of undetected misstatements, if any, could be both material and pervasive. A disclaimer is not an opinion; it simply states that the auditors do not express an opinion on the financial statements. All significant reasons for the issuance of a disclaimer of opinion should be set forth in a basis for modification paragraph that precedes the opinion paragraph. As we discuss later in this chapter, disclaimers may also result from substantial doubt about a client's ability to continue as a going concern or multiple uncertainties relating to the financial statements. We structure our discussion of audit reports around the two basic types of opinions just outlined—unmodified and modified opinions. Since several circumstances may result in either an unmodified or a modified opinion (e.g., substantial doubt about going-concern status and uncertainties), we emphasize those circumstances that are encountered most frequently.
- Fall '13
- Auditor's report, component auditors