An auditor’s opinion is the outcome of the auditor’s review, There are mainly the four types of audit opinion, after examination of books of accounts auditor has formed an opinion which can be any of the follows:
• Unqualified Opinion
• Qualified Opinion
• Adverse Opinion
• Disclaimer Opinion
Unqualified Opinion: people should not feel any confusion regarding the term unqualified as it seems negative but here in the audit terminology an unqualified opinion which is formed by the auditor appointed independently by the company’s author meaning that company has followed the standard of GAAP, auditor confirms the financial statements.
It is an opinion in which auditor ensures in the opinion that the financial accounts are fair and free from an fraud or misappropriation, it gives clean chit to the organization by expressing his opinion regarding the fairness of the books of accounts.
Qualified Opinion: in this type of auditor’s opinion unfortunately company does not meets with the standards and the opinion formed by the auditor is not in favor of the fairness of accounts.
An auditor express his opinion as qualified opinion when he do not see company meeting requirement and disagree with the data, facts and figures provided by the company.
Adverse Opinion: an adverse opinion is declared by an auditor that the books of accounts are not accurate they are mistreated or misrepresented, it does not reflect true and healthy performance.
The adverse opinion of an auditor puts negative impact for the company and its shareholders as this opinion shows the red flag for the company.
In public limited company it is not very common that financial statements are misrepresented as the judiciary and some other institutions can be involved in it a public limited company shareholder can go to the court and ask for the fair and independent audit, but in private the authority of judiciary is very limited.
Disclaimer Opinion: An auditor issues disclaimer opinion in two cases either the auditor is appointed not independent, the authority who has appointed the auditor has made some boundaries for the auditor to work within that boundary and in the result auditor is not able to provide accurate result.
In this opinion the company does not provide or provides very little information to the auditor so the auditor becomes stuck within the limitations and becomes not able to form any opinion rightfully.
Even with such restrictions, with the report the letter head of auditor is also attached.