Question

Types of opinions about internal controls over financial reporting.

Answer 1

Answer:

Opinions about internal controls over financial reporting:

Auditor's opinion:

Auditor's opinion is a certificate or a document that attached with the financial statements. It is prepared on the basis of audit procedures and records used to produce the statements and provides an opinion as to whether material misstatements exist in the financial statements. The auditor's opinion may also be called as accountant's opinion. The auditor will test the internal controls and provide an opinion as to their effectiveness.

How the opinions about the internal control works:

The auditor's opinion is presented in the form of a report. It works through four sections. The report begins with an introductory section which outlines the responsibility of audit firm.In the second section it identifies the financial statement. The third section identifies the auditor's opinion on the financial statement. And the fourth section provides explanation regarding the opinion whether it is qualified or an adverse opinion. This the how an audit opinion is drawn.

Types of Opinions:

The auditor's opinions can be categorized into four types.They are;

• Unqualified opinion
• Qualified opinion
• Adverse opinion
• Disclaimer of opinion

Explanation:

• Unqualified opinion:

An unqualified opinion is also known as clean opinion. If the financial statements are free from material misstatements then the auditor reports an unqualified opinion.If the management has claimed responsibility for its maintenance in this case the unqualified opinion is given over internal control of the entity.

• Qualified opinion:

​​​​​​​The qualified report is given in accordance with the GAAP. GAAP means Generally Accepted Accounting Principles.The auditor will present a qualified opinion when the financial records of the company have not followed GAAP. In this case the auditor will provide an additional explanation about the deviations from GAAP in the financial statements and points out why the auditor's opinion is qualified. The qualified opinion is usually given due to the limitations in the scope of audit and accounting methods.

• Adverse opinion:

​​​​​​​If an auditor reports an adverse opinion this says that the business has received the most unfavorable opinion. If the financial statement is not in accordance to the GAAP and are totally misstated then the auditor will report an adverse opinion. An adverse opinion indicates the fraud hence the businesses that receive adverse opinion are forced to correct their financial statements but practicing a re-auditing.

• Disclaimer of opinion:

​​​​​​​The auditor sometimes reports a disclaimer of opinion if he is unable to complete the audit report due to the absence of proper financial statements and if the management do not cooperate. The disclaimer of opinion is not an opinion itself.

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