An audit opinion (or independent auditor’s report) is a formal certification accompanying a set of financial statements. The set of financial statements usually includes the balance sheet, income statement, and statement of cash flows.
An independent accounting firm issues an audit opinion after it has examined the company’s financial statements.
There are generally three levels of audit opinion.
- Unqualified Opinion. For an unqualified opinion, also referred to as a clean opinion, the auditor believes the financial statements present fairly in all material respects the financial position and results of the company. The unqualified opinion is what every company desires to receive.
- Qualified Opinion. For a qualified opinion, the auditor believes the financial statements contain material misstatements or omissions.
- Adverse Opinion. For an adverse opinion, the auditor believes the financial statements do not fairly present the financial position and results of the company.
A U.S. company generally prepares its financial statements in accordance with Generally Accepted Accounting Principles (GAAP). The company auditors are familiar with US GAAP accounting principles and use Generally Accepted Auditing Standards (GAAS) to examine the financial statements.