Ethical Obligations and Decision-Making in Accounting 2nd Edition by Steven Mintz, Roselyn Morris

Exercise 2

Distinguish between the circumstances when an auditor might give an unqualified opinion with an explanatory paragraph, a qualified opinion, and an adverse opinion. Do you think a disclaimer is an acceptable substitute for a qualified or adverse opinion? Why or why not?

Step 1 of 3

Audit:

The audit is the process of checking the financial statements of a company `to ensure that it is 100% authentic and free from any kind of bias or fraud.

Audit report:

It is a report prepared by the auditor after checking all the financial statements of the company properly.

Types of audit report:

1.

Unqualified: It is also called a clean audit. This is a type of report where the financial reports are free from all kinds of bias, errors, and manipulation. The company follows all rules and regulations under GAAP properly. Investors and banks the companies that come under this type.

2.

Qualified: It is a type of audit report in which the company fails to maintain the financial statements according to the standards.

3.

Adverse opinion: It is a type of audit report in which the company fails to maintain the financial statements properly, it contains some errors and omits.

4.

Disclaimer: It is a type of audit report in which the company does not have enough evidence to support the financial records prepared by them.