Understanding Audit Opinion Reports
When you’re feeling ill and find yourself at any doctor’s office or walk-in clinic, what are you looking for? Usually, it’s some sort of relief from whatever ailment you’re suffering from, whether it be a headache, a stomachache, or a broken arm. You’re searching for outside advice about what might be wrong internally, and any doctor is more than willing to give you their professional assessment of your condition.
It might surprise you to learn that audit groups also submit professional opinions that are vital to the health of the businesses that they work with. Audit opinions are imperative for companies for many reasons, including accurately presenting a business to possible investors, as well as protecting your company from possible fraud.
Before we get to the many important aspects of the audit opinion report, we first need to determine what an audit opinion truly is.
What Is an Audit Opinion Report?
An audit opinion is an educated assessment of a business’s financial records as it relates to accuracy and legality. It ends up as a certification that accompanies financial statements and helps investors gain a full picture of an organization’s financial condition. It can also help to maintain the integrity of the audit since the opinion report must match up with what is found among the financial documents.
Audit reports are usually made up of six key components, to wit:
- A title that includes some sort of reference to the fact that the financial records were audited independently to rule out the possibility of bias
- An introductory paragraph that covers the time of the audit, as well as the type
- A “scope” paragraph, which essentially outlines the guidelines and rules used by the auditor during the process (this ensures that the auditor present used the correct procedures when making his or her assessment)
- The audit opinion paragraph in which the audit is assigned one of the type categories explained below
- The auditor’s name
- And the auditor’s signature.
Now that the general idea of an audit opinion report has been defined and explained, we can now dive into the different types of audit opinions that exist.
Different Types of Audit Opinions
There are four main types of audit opinions that can be filed as opinion reports. Each of these opinion categories signifies official financial rulings used by internal and external investors to make advanced business decisions. The four types include unqualified opinions, qualified opinions, disclaimer of opinion, and adverse opinions.
This type of opinion is what’s known as a “clean report”. This is the kind of report that your company will want to receive since it signifies that your CPA couldn’t find any misinformation or violations within your company’s financial information. After finding no misstatements within the financial materials presented, both the company and auditor can be perceived as following the appropriate laws and can continue running smoothly.
When an auditor becomes unsure about a company’s ability to remain within the law, they issue a qualified opinion. This means that an auditor has found one or two violations within a company’s financial report and can therefore not issue a clean or unqualified report. This looks problematic for possible investors since it tends to signify possible mismanagement of company funds or disorganization within the business.
Disclaimer of Opinion:
When this particular report is issued, it usually means that the auditor is attempting to remove themselves from the financial reviewing process. CPAs that issue this report usually do not feel confident that the company has shared all of the necessary information to accurately perform the audit, or that they were not given the freedom to do their job correctly while observing company operations. A disclaimer of opinion is usually seen as very harsh and casts a negative view of the company under review.
Adverse opinions are reported when an auditor is completely dissatisfied with the financial information presented and does not feel as though the company is operating within the constraints of the law. In addition, the auditor has usually found massive misstatements that could signify fraud. Adverse opinions reports are a huge red flag for potential investors and can mean that the financial state of your business is in serious trouble. It’s as much of a warning for the business owner as it is for those who might want to become shareholders.
Why an Audit Opinion is Important
Audit reports as a whole are key to ensuring the success of your business. Not only do they protect your company from possible fraud, but they also give company owners a better understanding of how their company is being run. It simply isn’t possible for most owners to check up on every employee they have during their very busy workdays, and audit reports are key to finding out exactly where money is going and how it’s being used.
Audit opinions themselves are key because they sum up the audit report in a way that is easy for possible investors to understand and assess. They are often the documents that businesses like banks, creditors, or other financial institutions require before deciding to lend money to a business. In addition, they add credibility to financial statements, since the additional perspective of a professional was sought.
It’s clear that auditing your business is essential to maintaining its strength and longevity, and that audit opinions are vital to the world of investment. Getting paired with the right audit group for you and your organization is the next step, and luckily, we’re here to help.
What The Baird Audit Group Can Do for You
At The Baird Audit Group, we have been serving the businesses and non-profits since 1927. We combine our incredibly knowledgeable staff of CPAs and accountants with our full-service audit plan to best give you the most meaningful insights about your business. We want to ensure that your business is running smoothly from the inside out. Our team offers a full range of financial reporting, including audits, compilations, reviews, and agreed-upon procedures. Contact us today by calling 706.855.9500 or go online to find out how we can help your business or organization.