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Qualified Opinion Definition
A qualified opinion is the opinion of an auditor over the financial statement of a company or information provided, stating that they are incomplete. In an audit, an audit is required to give a professional opinion about the financial data and information provided by a business. A qualified opinion is a report or opinion written by a certified public accountant or a professional auditor which pronounces the information provided by a business as limited or incomplete.
A qualified opinion is often given when the business being audited did not follow the generally accepted accounting principles (GAAP) when preparing their financial statement.
A Little More on What is a Qualified Opinion
The opinion or report of the auditor is a crucial part of an audit process. In every audit, the report of an auditor is essential as it is a pointer that shows whether a company’s financial statement maintained GAAP principles or otherwise. Businesses try to avoid qualified opinions, given that these opinions suggest that the financial information provided by the company is fairly presented but is incomplete in some aspects.
Despite that, a qualified opinion does not negatively affect the efficiency or performance of a business, companies or organizations do their best to avoid such opinions.
Qualified Opinion Situations
A qualified opinion is an indicator that the auditor was unable to get enough data or financial information on the company as a limitation on the scope of the audit.
Omitted figures, uncertain data, and unconfirmed estimates can also cause a professional auditor to write a qualified opinion on a financial statement. Also, failure to conform with the laid down rules of GAAP can lead to a qualified opinion issued on a business’ financial report.
Generally, the inability to verify the data, figures or estimates supplied in a company’s financial information creates qualified opinions. Also, when there is an absence of notes, explaining the occurrence of certain figures in the statement, it can create dought or uncertainty for the auditor, thereby causing a qualified opinion.
Layout of Auditor’s Report
A qualified opinion is an integral part of an auditor’s report after an adit process had been done in a business. The final section of the auditor’s report is where qualified opinions can be found, this is the section whether the auditor gives reasons for the opinion they form on the financial statement of the business, among others. The opinion that an auditor gives about a financial statement includes opinions about audit and internal controls of the business.
Qualified vs. Adverse vs. Disclaimer
A professional auditor or a certified public accountant can give diverse opinions on the financial information provided by a company. These are; qualified opinions, unqualified opinions, adverse opinions, otherwise called a disclaimer of opinion. An adverse opinion is given by an auditor if the financial statement of a company is inappropriate and there is the need for another audit of the financial statement. Unlike a qualified opinion which is given when their financial statement has been fairly reported but there are specific aspects that are incomplete.
When an auditor cannot give a qualified or unqualified opinion on a financial statement, a disclaimer of opinion is given. The inability of an auditor to finish an accurate audit report warrants a disclaimer of opinion to be written.