Unqualified Audit – Definition

Cite this article as:"Unqualified Audit – Definition," in The Business Professor, updated February 22, 2020, last accessed May 31, 2020, https://thebusinessprofessor.com/lesson/unqualified-audit-definition/.

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Unqualified Audit Definition

An unqualified audit is a form of an audit of a company’s account and finances done by an independent auditor. Usually, audits are appraisals of a company’s status and how compliant it is to generally accepted accounting principles (GAAP). An unqualified audit is one of the four types of audits, other types are qualified audits or opinion, adverse opinion, and disclaimer of opinion. Once an independent auditor carries out an unqualified audit on a firm, an unqualified opinion is given stating that the firm’s financial statements are properly presented and follow the principles of GAAP.

During an unqualified audit, the independent audit examines the internal records of a firm as well as its financial statements and other external records.

A Little More on What is an Unqualified Audit

An unqualified audit or opinion is otherwise called a clean opinion, this opinion is given by an independent auditor showing that the financial statement of a firm is free from misrepresentations, ambiguity and are compliant to the standards of GAAP. An unqualified is the most favorable audit or opinion a business can receive, it is done by an independent auditor without any biases or prejudice.

An unaudited opinion is the opposite of an unqualified audit, this type of opinion is given without any appropriate findings of the financial statement of a firm or internal and external practices. Unqualified audit, however, pays attention to the details and accuracy of the financial statements presented by a company and its internal and external practices.

Unqualified Report vs. Qualified Report

In every audit, the auditor is expected to give his opinions about the financial statement of a company and how well the company has maintained the standards of GAAP. Qualified opinion (report) or an unqualified opinion (report) can be given. In an unqualified opinion, an auditor discloses that the financial statements of a company are fairly and accurately presented and that the business complies with the standards of GAAP.

A qualified report, on the other hand, is an auditor’s opinion about a firm which concludes that the business has been largely compliant but a few parts of its financial statements are mispresented. This report could also mean that some parts of the company’s statement are in disagreement with the standards of GAAP.

References for “Unqualified Audit

https://www.investopedia.com/terms/u/unqualified-opinion.asp

https://smallbusiness.chron.com › Accounting & Bookkeeping › Audit Reports

https://www.accountingcoach.com/terms/U/unqualified-opinion

Academic research for “Unqualified Audit

Does auditor explanatory language in unqualified audit reports indicate increased financial misstatement risk?, Czerney, K., Schmidt, J. J., & Thompson, A. M. (2014). Does auditor explanatory language in unqualified audit reports indicate increased financial misstatement risk?. The Accounting Review, 89(6), 2115-2149.

Do investors respond to explanatory language included in unqualified audit reports?, Czerney, K., Schmidt, J. J., & Thompson, A. M. (2019). Do investors respond to explanatory language included in unqualified audit reports?. Contemporary Accounting Research, 36(1), 198-229.

The information contents of modified unqualified audit opinions under the control of concurrent information: The case of Taiwan, Lai, S. C., Lin, C., Li, H. C., & Wu, F. H. (2009). The information contents of modified unqualified audit opinions under the control of concurrent information: The case of Taiwan. 會計與公司治理, 6(1), 31-55.

Communication through the audit report: an empirical investigation of the unqualified audit report in Saudi Arabia, Al Otaibi, S. A. (2003). Communication through the audit report: an empirical investigation of the unqualified audit report in Saudi Arabia (Doctoral dissertation, © Salem Abdullah Al Otaibi).

Propensity of unqualified audit reports and auditors’ independence in Nigeria, Oladipupo, A. O., & Izedonmi, F. I. O. (2013). Propensity of unqualified audit reports and auditors’ independence in Nigeria. African Research Review, 7(3), 34-46.

The type of internal control audit opinion and individual investors′ confidence in unqualified audit opinion on financial statement–An experimental research, Jixun, Z., & Yanan, H. (2013). The type of internal control audit opinion and individual investors′ confidence in unqualified audit opinion on financial statement–An experimental research. Audit Research, 4, 93-100.

The road to an unqualified audit opinion: One federal agency’s story, Force, M. S. (2000). The road to an unqualified audit opinion: One federal agency’s story. The Journal of Government Financial Management, 49(2), 8.

Study on Information Content and Differences of an Unqualified Audit Opinion with an Emphasized Matters Paragraph, ZHANG, Y., & CHEN, J. (2012). Study on Information Content and Differences of an Unqualified Audit Opinion with an Emphasized Matters Paragraph. Journal of Guizhou University of Finance and Economics, (5), 15.

Study on Information Content and Differences of an Unqualified Audit Opinion with an Emphasized Matters Paragraph, ZHANG, Y., & CHEN, J. (2012). Study on Information Content and Differences of an Unqualified Audit Opinion with an Emphasized Matters Paragraph. Journal of Guizhou University of Finance and Economics, (5), 15.

The Sound of Silence: What Does a Standard Unqualified Audit Opinion Mean Under the New Going Concern Financial Accounting Standard?, Owens, J., Saunders, K. K., Schachner, S., & Thornock, T. A. (2019). The Sound of Silence: What Does a Standard Unqualified Audit Opinion Mean Under the New Going Concern Financial Accounting Standard?. Available at SSRN 3374039.

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