In order to continue enjoying our site, we ask that you confirm your identity as a human. Thank you very much for your cooperation.
An auditor shall disclaim an opinion when the auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion, and the auditor concludes that the possible effects on the financial report of undetected misstatements, if any, could be both material and pervasive. [ASA705, paragraph 9]
The auditor shall disclaim an opinion when, in extremely rare circumstances involving multiple uncertainties, the auditor concludes that, notwithstanding having obtained sufficient appropriate audit evidence regarding each of the individual uncertainties, it is not possible to form an opinion on the financial report due to the potential interaction of the uncertainties and their possible cumulative effect on the financial report. [ASA705, paragraph 10]
To me there is no difference between the two terms as they concludes one and the same thing. Auditing Standards use both terms to mean one and the same thing. But it has been observed that the term Unmodified opinion is used more often in standards instead of Unqualified opinion.
Some authors try to differentiate between these two terms as follows:
Unmodified opinion is the opinion where auditor expresses an opinion that financial statements are presented, in all material respects, in accordance with applicable financial reporting framework.
Unqualified opinion is the opinion where auditor expresses an unmodified opinion (as above) AND attaches an Emphasis of Matter Paragraph.
Simply, unmodified opinion is a clean opinion where as unqualified opinion is a “modified” clean opinion with emphasis of matter paragraph.
But to my mind we should not try to differentiate the terms in such way. The reason is that if we refer to Para 7(d) of ISA – 706 it is clearly stated that if auditor has included an Emphasis of Matter paragraph in the audit report than he must also indicate that opinion has not been modified in respect of the matter emphasized. So, this alone is enough to clear at any confusion regarding unqualified opinion and unmodified opinion. Therefore, both terms mean one and the same thing.
(According to 2010 handbook) The term Unqualified Opinion has not been defined under any pronouncement issued by IAASB where as Unmodified Opinion does have a definition. Also, most widely used term is Unmodified opinion in the pronouncements, however, the term Unqualified opinion has been used in pronouncements related to Other Assurance Engagements and Related Services
May 12, 2022 May 12, 2022/ Steven Bragg
A clean opinion is an unqualified auditor’s report regarding an entity’s financial statements. Such a report indicates the auditor’s belief that the entity’s financial statements fairly present its financial results, financial position, and cash flows. When an auditor does not believe that this is the case, a qualified opinion, adverse opinion, or disclaimer of opinion is issued. The investment community and lenders are usually only willing to invest funds in a business that has been accorded a clean opinion.
Related Courses
How to Conduct an Audit Engagement
May 12, 2022/ Steven Bragg/
We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.
The document you are viewing contains questions related to this textbook.
Chapter 9 / Exercise TIF9-1
Managerial Accounting
Warren/Tayler