Qualified Audit Report Means?
By BYJU'S Exam Prep
Updated on: November 14th, 2023
Qualified Audit Report means auditor expresses an opinion with reservations of a material nature but not pervasive. The qualified reports are issued by an auditor that contain discrepancies that are termed as qualifications. As a result, this report expresses a qualified opinion about the financial position depicted in the financial statements as being true and fair.
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Qualified Audit Report
An audit report is a public document that informs about the financial status of the company. It is required by law if the company is traded publicly or is regulated by the Securities and Exchange Commission (SEC). Auditors prepare the audit reports based on a set of principles established by the Financial Accounting Standings Board.
On a single aspect of the financial reporting or on a number of factors, a qualified opinion may be given. However, for a qualified audit report to be published, the discrepancies should apply to a subset of the financial statements and must not be severe as to invalidate the financial statements as a whole. In serious situations, a negative report rather than only a qualified one is released.
Based on the auditing that is done by an auditor, the audit report is classified into the following four categories:
- Unqualified Report: It is also called a “clean opinion’. An unqualified report contains an unqualified audit opinion one in which the auditors state that the financial statements include no serious misstatements and are free of misrepresentations. It is the best type of report that can be received by a firm.
- Qualified Report: The report in which auditors express a qualified view of financial statements is a qualified audit report. It means that the company’s financial records are not maintained in accordance with Generally Accepted Accounting Principles (GAAP) but no misinterpretations are involved. In such a case, the company meets qualifications so that its financial status can be approved.
- Adverse Report: An adverse audit report is one in which auditors discover a major misrepresentation or find fraud within the company. Such a report alerts financial professionals and people about the company’s dishonest practices.
- Disclaimer Report: The audit report states that auditors are not permitted to offer their views on the company’s financial reports. When such a report is issued by an auditor, then it means that the company has prevented them to make proper observations in their financial statements.
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