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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.

Explaining '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.


Further Reading


The role of economic trade-offs in the audit opinion decision: An empirical analysis
journals.sagepub.com [PDF]
This study examines the relationship between qualified audit opinions and earnings management, as measured by discretionary accruals (accounting earnings management) and abnormal production cost (real earnings management), for listed firms on the Tehran …

Predicting audit qualifications with financial and market variablesPredicting audit qualifications with financial and market variables
www.jstor.org [PDF]
This study examines the relationship between qualified audit opinions and earnings management, as measured by discretionary accruals (accounting earnings management) and abnormal production cost (real earnings management), for listed firms on the Tehran …

Evaluating firms in financial distress: An event history analysisEvaluating firms in financial distress: An event history analysis
clutejournals.com [PDF]
This study examines the relationship between qualified audit opinions and earnings management, as measured by discretionary accruals (accounting earnings management) and abnormal production cost (real earnings management), for listed firms on the Tehran …

Earnings management and the audit opinion: Evidence from MalaysiaEarnings management and the audit opinion: Evidence from Malaysia
www.emerald.com [PDF]
This study examines the relationship between qualified audit opinions and earnings management, as measured by discretionary accruals (accounting earnings management) and abnormal production cost (real earnings management), for listed firms on the Tehran …

Qualified audit opinions and auditor switchingQualified audit opinions and auditor switching
www.jstor.org [PDF]
This study examines the relationship between qualified audit opinions and earnings management, as measured by discretionary accruals (accounting earnings management) and abnormal production cost (real earnings management), for listed firms on the Tehran …

The economic determinants of auditor compensation in the initial public offerings marketThe economic determinants of auditor compensation in the initial public offerings market
www.jstor.org [PDF]
This study examines the relationship between qualified audit opinions and earnings management, as measured by discretionary accruals (accounting earnings management) and abnormal production cost (real earnings management), for listed firms on the Tehran …

A political–economic analysis of auditor reporting and auditor switchesA political–economic analysis of auditor reporting and auditor switches
link.springer.com [PDF]
This study examines the relationship between qualified audit opinions and earnings management, as measured by discretionary accruals (accounting earnings management) and abnormal production cost (real earnings management), for listed firms on the Tehran …

Reactions of the Spanish capital market to qualified audit reportsReactions of the Spanish capital market to qualified audit reports
www.tandfonline.com [PDF]
This study examines the relationship between qualified audit opinions and earnings management, as measured by discretionary accruals (accounting earnings management) and abnormal production cost (real earnings management), for listed firms on the Tehran …


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