When a company engage an audit firm in Johor Bahru to conduct audit activities, based on the conditions, they may obtain two types of audit opinion (Also see Principles of Auditing) , which are the qualified audit opinion and the unqualified audit opinion.
Qualified Audit Opinion:
The qualified audit opinion is adjusted from the standard opinion because the presented financial statements are not true and fair, or the statements are not fairly presented according to the application framework and standard.
Usually, if the result of the audit testing shows that the financial statements (Also see Employ Accounting Service in Singapore To Prepare Financial Statements ) are presenting a true and fair view, the auditor will issue the standard unmodified opinion.
However, if the result of audit testing indicates that material misstatements are present, the auditor needs to modify his opinion.
Receiving qualified audit opinion from the auditor is not a piece of good news to the management and the firm since this type of opinion might cause the users to doubt the integrity of the management and financial statements of that firm.
The firm will issue the audit report to its shareholders, investors, as well as those charged with governance. This group of stakeholders will question the management of the qualified audit opinion. (Also see How to Ensure Your Company’s Audit Process Goes Smoothly?)
Sometimes, if the bankers require this report to allow them to examine the financial stability of a firm and how the integrity of the management is, they may not offer loan to it, or they will stop extending terms with it.
Unqualified Audit Opinion:
This occurs when the auditors review the financial statements of the company and conclude that they did not discover any material misstatement. This opinion is not the same as a qualified opinion. (Also see Audit – Introduction to Unqualified Opinion)
The auditors will issue the unqualified audit opinion on their client’s financial statements in their audit report when their client has prepared and presented those statements in all material aspect by following the appropriate accounting standards.
Nevertheless, people would use the term unqualified opinion to express an unmodified audit opinion.
If you search for ISA 700, Forming an Opinion and Reporting on Financial Statements, and browse for the term unqualified opinion, you will not see it.
The truth is that the standard uses the word “unmodified”. However, we will usually use both the words “unqualified” and “unmodified”.
When an auditor issues an unqualified opinion, it indicates that the average level of integrity of financial statements and the management who supervise the company is better than those companies that get a modified audit opinion.
This could be helpful to the management if they want to acquire more funds from the banks, investors, as well as the shareholders.