Clean opinion definition
/What is a Clean Opinion?
A clean opinion is an unqualified auditor’s report regarding an entity’s financial statements. Such a report indicates the auditor’s belief that the entity’s financial statements fairly present its financial results, financial position, and cash flows. When an auditor does not believe that this is the case, a qualified opinion, adverse opinion, or disclaimer of opinion is issued. The investment community and lenders are usually only willing to invest funds in a business that has been accorded a clean opinion.
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Example of a Clean Opinion
Here is an example of a clean opinion that an auditor might issue:
Independent Auditor’s Report
To the Shareholders and Board of Directors of XYZ Corporation
Opinion
We have audited the financial statements of XYZ Corporation (the "Company"), which comprise the statement of financial position as of December 31, 2024, and the related statements of comprehensive income, changes in equity, and cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS).
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements free from material misstatement, whether due to fraud or error.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
[Signature of Auditor]
[Auditor’s Address]
[Date of Auditor’s Report]
Advantages of a Clean Opinion
A business always wants to obtain a clean opinion from its outside auditor, since this assures its lenders, creditors, and investors that the organization has a robust accounting system that can consistently produce accurate financial statements.