Qualified Opinion

What is a 'Qualified Opinion'

A qualified opinion is a statement issued after an audit is done by a professional auditor that suggests the information provided was limited in scope and/or the company being audited has not maintained GAAP accounting principles. Auditors who deem audits as qualified opinions are advising whomever is reading the document the information within the audit is not complete or the accounting methods used by the company do not follow GAAP.

BREAKING DOWN 'Qualified Opinion'

A qualified opinion states the financial statements of a client are, with the exception of a specified area, fairly presented. A qualified opinion bears no reflection on the financial standing or operational efficiency of the organization.

Qualified Opinion Situations

A qualified opinion is typically given due to a limitation of scope in which the auditor was not able to gather sufficient evidence for various aspects of the financial statements. Without sufficient verification of transactions, an unqualified opinion may not be given. A qualified opinion is suitable when accounting procedures used do not conform to generally accepted accounting principles (GAAP). Inadequate disclosures in the notes to the financial statements, estimation uncertainty or the lack of a statement of cash flows are also grounds for a qualified opinion.

Layout of Auditor’s Report

A qualified opinion is listed in the third and final section of an auditor’s report. The first section of the report outlines management’s responsibilities in regards to preparing the financial statements and maintaining internal controls, while the second section outlines the auditor’s responsibilities. In the third section, an opinion is given regarding the company’s internal controls and accounting records. The opinion may be unqualified, qualified, adverse or a disclaimer.

Qualified vs. Adverse vs. Disclaimer

A qualified opinion is given in matters in which issues discovered in the financial statements are not pervasive and do not misrepresent the actual financial position of a business. It is a reflection of the auditor’s inability to give an unqualified opinion. If the issues discovered during the audit result in material misstatements, the opinion is escalated to an adverse opinion. This opinion results in the company needing to reissue and complete another audit of its financial statements, while a qualified opinion is still acceptable to lenders, creditors and investors. If an auditor is unable to complete an accurate audit report, it may issue a disclaimer of opinion. This indicates neither an unqualified nor qualified opinion regarding the financial statements, while a qualified opinion still gives an audit opinion regarding a majority of the financial statements.

RELATED TERMS
  1. Auditor's Opinion

    A certification that accompanies financial statements and is ...
  2. Opinion Shopping

    The practice of searching for an outside auditor who will provide ...
  3. Unqualified Opinion

    An independent auditor's judgment that a company's financial ...
  4. Adverse Opinion

    A professional opinion made by an auditor indicating that a company's ...
  5. Accountant's Opinion

    A statement signed by an independent accountant outlining his ...
  6. Accountant's Letter

    A letter that usually precedes a financial report. An accountant's ...
Related Articles
  1. Investing

    Why Companies Welcome an Unqualified Opinion

    An unqualified opinion is an independent auditor’s opinion that a company’s financial statements are fair and accurate.
  2. Investing

    Examining A Career As An Auditor

    Stricter government regulations have put auditing professionals in demand.
  3. Managing Wealth

    Financial Auditor: Career Path & Qualifications

    Learn more about what it takes to become an internal or external financial auditor, and determine whether the profession is right for you.
  4. Managing Wealth

    Financial Auditor: Job Description & Average Salary

    Discover what it means to hold a financial auditor position, including typical job duties, education and training, required skills and expected salary.
  5. Investing

    What Does an Auditor Do?

    An auditor ensures that organizations maintain accurate and honest financial records.
  6. Managing Wealth

    Internal Auditor: Job Description & Average Salary

    Learn about what the job of internal auditor entails, as well as the median salary, education and certifications required and future career path.
  7. Professionals

    Internal Auditor: Career Path & Qualifications

    Find out what kind of work internal auditors do in large organizations, and learn more about how to get started working in the field.
  8. Managing Wealth

    Career Advice: Accounting Vs. Auditing

    Understand the subtle distinctions between accounting and auditing, and learn what each offers a new graduate in terms of salary, job security and daily life.
  9. Investing

    What's an Audit?

    An audit is an objective examination of accounting records that makes sure the records are a fair and accurate representation of the transactions they claim to represent.
  10. Personal Finance

    IT Security Auditing

    Find out about this promising career that can match IT with business studies.
RELATED FAQS
  1. What should I do to prepare for an IRS audit?

    Find out how to prepare for an IRS audit, what kinds of audits you might face and what kinds of habits you should develop ... Read Answer >>
  2. What are some examples of inherent risk?

    Read about the nature of inherent risk in preparing and executing financial audits, including some common situations that ... Read Answer >>
  3. How is inherent risk assessed by an auditor?

    Learn how CPA auditors assess the levels of inherent risk of different audit areas that they use to design the procedures ... Read Answer >>
  4. How important are contingent liabilities in an audit?

    Read about the importance of contingent liabilities during an audit, why audits are necessary and how contingent liabilities ... Read Answer >>
  5. What is the difference between a compiled and a certified financial statement?

    All publicly-traded companies are required to provide financial statements, including a balance sheet, cash flow statement ... Read Answer >>
  6. What is an IRS letter audit / audit by correspondence?

    Learn about IRS letter audits, how tax returns are selected for audits and the common outcomes in the letter audits conducted ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center