There is a tremendous demand for audit firms around the globe. Audited financial statements are what creditors, financial institutions, investors, and banks look for when business owners return to them for investment and loans.
It is tensed and tedious, but for the companies, it is essential to have them. Moreover, the business owners need to understand the difference between the two audit reports, unqualified and qualified. It is necessary to know about an audit report first.
What is an Audit report?
When an auditor performs in a firm during the audit process, he may find some problems and issues in the accounting record. He writes his solutions and opinions about the audit.
He can make a report to the high-ups of the firm to the firm’s management. This audit report is an extremely vital part of an audit. It contains valuable information from the auditor. This report can either be unqualified or qualified.
What is the format of the report?
Many things are described in an audit report. It contains some segments that have some more details. Some critical sections of an audit report are here.
1st Section
In this section, the auditor gives the details of the responsibility of the company’s management.
2nd Section
In this Section, an auditor gives the details of their responsibility as an auditor. He describes the nature of his job. He states that only internal controls and financial statements are assessed.
3rd Section
This is the Section in which the opinions of the auditors are given.
Unqualified Report
It is one of the most common types of audit reports and is known as a clean report. In other words, it is an independent judgment of an auditor that a firm’s financial statements are appropriately and fairly presented in compliance with GAAP or generally accepted accounting principles without any exceptions.
This is like an auditor’s opinion that does not interpret financial data, and it does not contain the company’s financial position. It states that the auditor has gotten enough data during the audit to conclude that its financial statements conform to GAAP.
This report is issued when an auditor is satisfied with the accounting record of the company. He checks and gets satisfied with the information, and he believes the effect, application, and accounting policies that are disclosed to him are all accurate.
Qualified audit report
An auditor at auditing services issues this report that states specific discrepancies in the entity’s financial statements. It is a qualified opinion on the fair and accurate view of its financial statements‘ financial condition. A qualified opinion is stated in multiple aspects or a single element of financial reporting.
Difference between both the audit reports
Some of the essential points of difference between both the reports are here.
Meaning
It expresses a qualified opinion on the fair view and correct way, as stated in the financial statement.
An unqualified audit report clears the financial statements representing an honest and true view of the entity’s financial position.
Opinions in fair and true view of the financial statements
A qualified audit report provides clearance to the financial statements representing a fair and true view. In short, the auditor gives a qualified opinion here.
An unqualified audit report expresses that the financial statements are fair and true without incorrect data and information.
Adherence to accounting rules and standards
A qualified audit report raises note discrepancies and questions in the application of accounting rules and standards.
An unqualified audit report concludes that accounting rules and standards have been duly adhered to.
Substantiation
A qualified audit report is needed to validate its qualified opinion by stating the audit evidence; it has collected on which this report is based.
An unqualified audit report given without qualifications does not need any explanation.
The audit firms can help you maintain a true financial record of the business. In this way, companies can get a clean chit in their audit process.
Conclusion
Both unqualified and qualified audit reports by auditing services provide opinions on the devotion to financial reporting and accounting standards‘ correctness. Neither of these two audit reports is a comment on the performance and financial position of the company. It describes the true and fair view of the financial condition of the company.