An auditor’s report is a document issued by an independent auditor who has examined a company’s financial statements and internal controls. The purpose of an auditor’s report is to provide an opinion on whether the company’s financial statements are presented fairly and accurately, in accordance with generally accepted accounting principles (GAAP).
There are different types of auditor’s reports, which vary depending on the level of assurance the auditor is able to provide. Below are the most common types of auditor’s reports:
- Unqualified Report: This is the most common type of auditor’s report. It means that the auditor has examined the company’s financial statements and found no material misstatements or errors. The unqualified report is sometimes referred to as a “clean” opinion.
- Qualified Report: A qualified report is issued when the auditor identifies a limitation of scope or a departure from GAAP, but concludes that the misstatement is not material to the financial statements as a whole. A qualified report typically includes a paragraph explaining the nature of the limitation or departure and its effect on the financial statements.
- Adverse Report: An adverse report is issued when the auditor concludes that the financial statements are materially misstated and not presented fairly in accordance with GAAP. An adverse report indicates that the financial statements are unreliable and should not be relied upon by users of the financial statements.
- Disclaimer of Opinion: A disclaimer of opinion is issued when the auditor is unable to provide an opinion on the financial statements. This may occur when the auditor is unable to obtain sufficient evidence to form an opinion or when the scope of the audit is limited due to factors beyond the auditor’s control.
- Explanatory Paragraph: In addition to the above types of reports, an auditor may include an explanatory paragraph in the report to provide additional information on specific issues related to the financial statements. This can include a discussion of significant accounting policies or events that occurred during the year that have a material impact on the financial statements.
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