Audit Opinion

In an external audit of financial statements, the opinion is the short, formal verdict printed in the auditor's report. A clean result, called an unmodified opinion (formerly unqualified), tells readers the accounts give a fair picture apart from immaterial errors. Anything less produces a modified opinion: qualified, adverse, or a disclaimer where the auditor could not gather enough evidence. The report may also add emphasis paragraphs or key audit matters. In internal audit, the equivalent is an overall rating for an area after testing, such as satisfactory, needs improvement or unsatisfactory. Either way the opinion rests on evidence and materiality, and it gives assurance, not a guarantee. Lenders reading the accounts look first at whether the opinion is clean or carries a qualification.

An external auditor tests a retailer's accounts and finds all material areas correctly stated. It issues an unmodified opinion with one key audit matter about inventory valuation. In the same year, internal audit rates the retailer's returns process as needing improvement because approval checks are weak.