Audit Opinions


The objective of a financial statement audit is to express an opinion on whether the financial statements have been prepared, in all material respects, in accordance with the applicable financial reporting framework or whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework. Audit opinion falls into two broad categories; unmodified or unqualified audit opinion and modified audit opinion. The auditor can modify his opinion in three different ways: the auditor can either issue a qualified opinion or a disclaimer of opinion; and the auditor can also express an adverse opinion depending on the circumstances surrounding the modification of the audit opinion. The form of audit opinion expressed depends on whether the effects of events leading up to the issuance of the opinion are material or pervasive to the understanding of the financial statements.


Unqualified Audit Opinion


The auditor is required to express an unmodified or unqualified audit opinion when the auditor is satisfied that the financial statements have been prepared, in all material respects, in accordance with the applicable financial reporting framework or that the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework. How the auditor writes his opinion will depend on whether the audited entity prepares its financial statements to a fair presentation framework or a compliance framework.  In the case of an unmodified opinion expressed on a set of financial statements prepared to a fair presentation framework the auditor will state that the financial statements are presented fairly, in all material respects, in keeping with the applicable financial reporting framework. Where the financial statements are prepared in accordance with a compliance framework the auditor should state that the financial statements have been prepared, in all material respects, in accordance with the applicable financial reporting framework. 


Qualified Audit Opinion


The auditor shall express a qualified opinion having obtained sufficient appropriate audit evidence, concludes that misstatements, individually or in aggregate are material but not pervasive, to the financial statements or the auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion, but the auditor concludes that the possible effects on the financial statements of undetected misstatements, if any, could be material but not pervasive, to the financial statements. 


Adverse Opinion


An adverse opinion is expressed when the auditor does not believe that the financial statements are presented fairly, in material respects, in conformity with the applicable financial reporting framework – when financial statements are prepared based on a fair presentation framework. When expressing an adverse opinion on a set of financial statements prepared to a compliance framework, the auditor will state that, ‘in our opinion, the financial statements have not been prepared, in all material respects, in accordance with’ the applicable financial reporting framework. A misstatement in the financial statements that is both material and pervasive will lead to an adverse opinion being expressed on the financial statements.


Disclaimer


A disclaimer of opinion is expressed when the auditor is not able to obtain sufficient appropriate audit evidence due to effects or possible effects of limitation of scope which are both material and pervasive in nature; the auditor will simply state that he is unable to express an opinion on the financial statements due to the significance of the effects or possible effects of scope limitation.