Unqualified opinion definition
/What is an Unqualified Opinion?
An unqualified opinion is an audit report that has been issued with no reservations regarding the state of an audit client's financial statements. In this opinion, the auditor follows a standard opinion format to state that the financial statements are a fair representation of the financial results and condition of a client, in accordance with the applicable accounting framework (such as GAAP).
Creditors, lenders, and investors want to see financial statements with an unqualified opinion attached to them before they will lend money or invest funds. If there is any form of qualification to an audit opinion, this is a major red flag for financial statement users.
Example of an Unqualified Opinion
The following is an example of an unqualified audit opinion:
Independent Auditor’s Report
To the Board of Directors and Shareholders of [Company Name]:
Opinion
We have audited the accompanying financial statements of [Company Name], which comprise the balance sheet as of December 31, 20XX, and the related statements of income, changes in equity, and cash flows for the year then ended, and the related notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the financial statements present fairly, in all material respects, the financial position of [Company Name] as of December 31, 20XX, and its financial performance and its cash flows for the year then ended in accordance with [applicable financial reporting framework, e.g., International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP)].
Basis for Opinion
We conducted our audit in accordance with [applicable auditing standards, e.g., International Standards on Auditing (ISA) or Generally Accepted Auditing Standards (GAAS)]. 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 [Company Name] in accordance with the ethical requirements that are relevant to our audit of the financial statements, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that 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 the financial statements in accordance with [applicable financial reporting framework], and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing [Company Name]’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern, and using the going concern basis of accounting unless management either intends to liquidate [Company Name] or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing [Company Name]’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 [applicable auditing standards] will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
[Further description of auditor’s responsibilities as required by the applicable auditing standards.]
[Auditor’s Signature]
[Name of the Audit Firm]
[Auditor’s Address]
[Date of the Auditor’s Report]
Unqualified Opinion vs. Other Opinions
An unqualified opinion indicates that the auditor is satisfied with the fairness of presentation of a company’s financial statements. This is opposed to an adverse opinion, in which the auditor does not believe that the financial statements accurately portray a company’s financial position or results. Another option is the qualified opinion, in which the auditor concludes that there is a material issue, which they describe in the audit report. Yet another option is the disclaimer of opinion, where the auditor states that no opinion can be given, due to an issue that does not allow for the gathering of sufficient appropriate audit evidence.
Terms Similar to Unqualified Opinion
An unqualified opinion is also known as a clean opinion.