Why auditor’s opinion matters to a first-time founder
The auditor’s opinion is the central conclusion within the auditor’s report. Investors and lenders may examine whether it is unmodified, meaning no important problem changed the conclusion, modified, or not given at all. A founder should understand the wording and underlying issue rather than treating every signed report as equal evidence of financial quality.
Examples of auditor’s opinion
An auditor concludes that a company’s statements follow the relevant framework without errors or omissions large enough to affect users’ decisions and gives an unmodified opinion. If the auditor cannot obtain enough evidence about inventory and the possible effect is important but limited to that area, the auditor may give a qualified opinion, subject to the applicable standards.
Common misunderstanding
An unmodified opinion does not certify perfect accuracy, future success or absence of fraud. A qualified opinion identifies a specific important problem. An adverse opinion says the statements as a whole are seriously misleading, while a disclaimer says the auditor could not obtain enough evidence to give an opinion. Exact terminology can vary between standards.
When to use it
Read the opinion and entire report when reviewing audited statements, raising finance or investigating a business before a transaction. Ask management and, where appropriate, the auditor to explain any changed opinion or paragraph drawing attention to an important matter. Obtain accounting advice before drawing conclusions from unfamiliar wording or another jurisdiction’s reporting format.