Adverse Opinion

Question 1

What is the effect of an adverse opinion on the auditor’s report?

Answer 1

1. )No effect on introductory paragraph or management’s responsibility section.
2. )Modify last sentence of auditor’s responsibility section to refer to “…basis for our adverse audit opinion.”
3. )Add a Basis for Adverse Opinion paragraph before the opinion paragraph to describe the effects of the misstatement.
4. )Modify the opinion paragraph to express the adverse opinion.

Question 2

What is the one underlying cause for an adverse opinion?

Answer 2

The auditor concludes that misstatements are material and pervasive to the financial statements.

Question 3

What conclusion is expressed by an adverse opinion?

Answer 3

The auditor expresses a conclusion that the financial statements taken as a whole are not fairly stated. That is, taken as a whole, they are misleading.

Question 4

Give an example of the language used for an adverse opinion.

Answer 4

“In our opinion, because of the significance of the matter discussed in the Basis for Adverse Opinion paragraph, the financial statements referred to above do not present fairly…”