Clients often meet my colleagues and me with surprise when we come for an audit. It is said that the auditors are not expected to be the way we are - smiling, nice, and simply normal people.
In fact, the companies seem to have some false expectations for our cooperation since they mostly have experience dealing with tax inspectors, the State Audit Service, or other state controllers and have not worked with independent auditors.
The audit process is a shared responsibility of both the company and the auditor because they work, so to say, in tandem. Which means that in case the company fails to provide the data, representations, supporting documents, calculations, to the auditors in full, we would not be able to express relevant opinion on the financial statements of a company. This is why the management of a company receives a large number of written inquiries during the audit. The auditors are provided with sufficient evidence to form their opinion and prepare audit reports due to receiving written representations, replies, and clarifications, and by conducting the procedures required by International Standards on Auditing. You didn’t think that the auditors love to send mail or bury you under various documents, did you?
We often come across the fact that the audit reports cause misunderstandings and sometimes even resentment from clients because they are presented in such a specific language. For example, how should the management explain to the shareholders or owners a qualified auditor's opinion or a disclaimer of opinion? Does such an opinion become a verdict, or is it still possible to survive and recover?
Therefore, we have decided that it is necessary to create a source that will give information support for a client and serve as a "glossary" for those who do not work in the field of audit.
Let's study the types of auditors’ opinions and their meaning. There are two main types of opinions - qualified and unqualified, which can be presented in several forms:
Clean Opinion, or an Unqualified Opinion.
It is like manna from heaven for a client. This means that the auditors have not found material misstatements or inconsistencies to the reporting standards in the financial statements. In other words, either you and your company are preparing the financial statements and its disclosures in exquisite manner, or you are getting close to such a state in the eyes of the auditor.
Qualified Opinion.
This opinion indicates that the financial statements comply with the reporting requirements/standards, but there are material misstatements identified, which are significant but not comprehensive. This means that adjustments need to be made so that the financial statements would be in compliance with the reporting standards and provide the correct information for users in the ongoing periods.
Adverse Opinion.
This type of opinion states the availability of significant and comprehensive misrepresentations in financial statements that need to be revised by a company, as well as adjustments to be made to avoid negative effects in the future.
Disclaimer of Opinion.
This "verdict" is issued in specific cases when the auditor is limited in time, not provided with all the information that is significant and has a specific effect on the financial statements; or is not provided with any information at all, or is not allowed on the premises of the enterprise to fulfill direct obligations specified in the contract.
So, as auditors often say, an audit is not a sentence. And if a company is set up to be sustainable in the future, then the auditor's opinion is only a significant reason to change the form, habits and types of organizational behaviour in the company in order to bring you closer to the first type of the auditor's opinion, and thus, to simplify the financial reporting and control processes in your company.
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