The Four Types of Audit Opinion/Report Every Entrepreneur Must Know
Auditors in Dubai make certain judgemental assumptions before finalising their audit reports. Such judgments also known as opinions are reflected in the audit report, which is the most crucial outcome of the audit process. An audit opinion is the most critical aspect of an audit report as it provides to the investors a statement of the company’s financial status. The report prepared by audit firms in Dubai will be analysed by the investors to make investment decisions based on the information contained in it.
Investors rely upon the audit opinion as it reflects the integrity of the audit report and projects a true and accurate image of the company. Auditors form an audit opinion based on various factors such as how available the data was to them, whether they had an opportunity to follow all due procedures, the level of materiality and other related issues. All of these matters are subjective and depend on the auditor’s opinion. There are mainly four types of audit reports that the opinions of an auditor. They are:
1. Unqualified Opinion – Clean Report
Audit firms in Dubai may deliver an audit report with an unqualified opinion, which is often referred to as a clean report. A clean report with an unqualified opinion is the type of report that auditors in Dubai give most often. Since it’s a clean report, the companies also expect to receive a report with an unqualified opinion. An unqualified opinion is devoid of any adverse comments on the company’s financials and doesn’t contain any disclaimers about any clauses or the audit process.
A Clean Report indicates that the auditors are satisfied with the financial statements of the company. An Unqualified Opinion reflects an auditor’s belief that the company is compliant with governance principles and relevant laws. Investors, auditors, the company and the public consider such a report as free from material misstatements.
2. Qualified Opinion-Qualified Report
Audit firms in Dubai won’t issue a clean report if they are not confident about any specific process or transaction. In such a situation, auditors in Dubai will issue a Qualified Opinion instead of an Unqualified Opinion. Investors regard a Qualified Opinion unacceptable as they project an adverse picture of a company’s financial state. In such reports, the auditors will state the reasons why they are not about to issue an Unqualified Opinion. A Qualified Opinion is delivered often when the financial records are not prepared in accordance with local and international accounting standards.
3. Disclaimer of Opinion-Disclaimer Report
When auditors want to distance themselves from giving any opinion on financial statements, they issue a Disclaimer of Opinion report. Usually, such a report is issued when the auditors feel the company has limited their ability to carry out a thorough audit or the management didn’t provide satisfactory explanations for their questions.
They may have failed to decipher the exact nature of specific transactions or to gather adequate evidence to support good financial reporting. Auditors who couldn’t get the opportunity to observe operational procedures or review specific procedures may believe they can’t express a definite opinion. In such a case, they may think that a disclaimer is necessary. Investors generally consider a disclaimer constitutes a harsh stance, portraying a negative image of the company.
4. Adverse Opinion-Adverse Audit Report
The fourth type of opinion is called the adverse opinion, which is not favoured by the business community. Auditors in Dubai issue an adverse opinion when they are not at all satisfied with the financial statements or find a high level of material misstatements or irregularities.
An adverse report is a big red flag for the government, investors and the public. An adverse report means that financial reports contain gross misstatements and have the potential for fraud. It raises an alarm that the company has not prepared the records as per the local and international standards. Lenders and investors take an adverse opinion seriously and will not do any business with the company.
How can Jitendra Chartered Accountants Help You?
Audit firms in Dubai may issue different types of audit reports depending on the financial statements of the companies. Auditors in Dubai may issue a Qualified Audit Opinion to alert the public, investors or government on the transparency, reliability and accountability of companies. The opinion expressed by audit firms in Dubai such as Jitendra Chartered Accountants (JCA) positively influences the companies to change their financial reporting processes and incorporate the best accounting practices.
JCA has been providing bespoke audit services in Dubai for more than 20 years. Our Chartered Accountants in Dubai strive to add value to businesses by conducting audits. JCA has audit experience in a wide range of industries such as manufacturing, logistics, retail, e-commerce, e-gaming, and other key sectors. Businesses can also seek our assistance to navigate compliance issues related to VAT, Economic Substance Regulation (ESR), Ultimate Beneficial Ownership (UBO) and Anti-Money Laundering and Combatting Financing of Terrorism (AML-CFT). Our audit services in Dubai will enable your company to build a good reputation among the banks, the government, free zone authorities, shareholders, and potential investors.