What is Opinion Shopping?

Opinion shopping is the practice of searching for an auditor that will issue an unqualified opinion on a company’s financial statements. An unqualified opinion indicates that the firm’s financial statements are fairly presented, and that they conform to the applicable accounting framework. Opinion shopping is most common when a company has a strained relationship with its existing auditor, because the company is engaging in accounting practices with which the auditor disagrees.

Advantages of Opinion Shopping

There are several advantages associated with the use of opinion shopping, which are as follows:

Improved funding opportunities. By engaging in opinion shopping, a business has a better chance of convincing creditors, lenders, and investors to give a firm funding, since these parties rely on the auditor’s opinion when making funding decisions.
Reduced debt cost. A business might be able to secure a lower interest rate on its debt from a lender, so there is a direct monetary reward resulting from opinion shopping.

Disadvantages of Opinion Shopping

There are also several disadvantages associated with opinion shopping, which are as follows:

Higher fraud risk. A business that engages in opinion shopping probably has questionable financial processes and so is at a higher risk of being accused of fraud.
Reduced access to auditors. Given these issues, many auditors will refuse to deal with a management team that is known to engage in opinion shopping.
Worse investor relations. It will also look strange to the company’s investors if the firm is constantly shifting through a series of auditors - which might lead them to suspect that the firm is having a hard time getting a clean opinion on its financial statements. As a result, investors may sell their stakes in the business, or refuse to give it additional funds.