What types of audit opinion can an auditor give, and when is each used?
What the interviewer wants to hear
- Unmodified when statements are true and fair
- Qualified when misstatement or lack of evidence is material but not pervasive
- Adverse when misstatement is material and pervasive
- Disclaimer when evidence cannot be obtained and effects could be material and pervasive
- Emphasis of matter and other matter paragraphs do not modify the opinion
Model answer
There are four types. An unmodified, or clean, opinion is given when the auditor concludes the financial statements give a true and fair view in all material respects. The other three are modified opinions under SA 705. A qualified opinion is used when there is a material misstatement, or the auditor cannot get enough evidence on something, but the effect is not pervasive; the report says “except for” that matter. An adverse opinion is used when misstatements are both material and pervasive, meaning the statements as a whole are misleading. A disclaimer of opinion is used when the auditor cannot obtain sufficient appropriate evidence and the possible effects could be material and pervasive, so no opinion is expressed. Separately, an emphasis of matter or other matter paragraph can be added to draw attention to something, but it does not change the opinion itself.
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