ARAGON, Kaycy A.

BSA3_B

AAP

1. Give an example of actual scenario where an auditor may express qualified opinion, adverse
opinion and disclaimer on Opinion” (actual audit findings)

Qualified opinion

A qualified opinion is a statement provided by an auditor in conjunction with a

company's audited financial statements in an auditor's report. It's an auditor's view that says
a company's financial information was limited in scope or that there was a serious fault with
the application of generally accepted accounting principles (GAAP)—but not one that was
pervasive.

To the shareholders of ABC Limited

Basis for Qualified Opinion

No provision for impairment has been made on receivables of the debtor ABZ Co, which has
ceased trading, as explained in Note Z to the financial statements. This receivable is not secured
by the company, and no payment has been made on it. This is not in compliance with the
International Financial Reporting Standards (IFRS). For the year ending December 31, 2019, a
provision of ZZZ should be made on the basis of no security debt. As a result, as of December 31,
2019, the profit before taxes and current assets should be lowered by ZZZ.

Qualified Opinion

In our opinion, except for the effects of the matter described in the basis for a qualified opinion,
the financial statements give a true and Fair view, in our material respects, the financial position
ABC limited as at 31 December 2019, and its financial performance and its cash flows for the
year then ended, in accordance with international financial reporting standards relating to the
preparation and presentation of financial statements.

Adverse Opinion

An auditor's unfavorable opinion indicates that a company's financial statements are

misrepresented, misstated, and do not adequately reflect its financial performance and health.
Adverse views are usually issued following the completion of an audit report, which can be
internal or external to the organization.

During the financial year 2018-19, a corporation was struck by an extraordinary event
(earthquake), which devastated much of the company's business operations. These factors
 imply that the company's capacity to continue as a going concern is seriously harmed. As a
result, it may be unable to realize its assets or pay off its debts in the normal course of business.
The said information is not disclosed in the company's financial statement or notes to the
financial statements.

Adverse Opinion

In this scenario, failing to disclose the fact of "business devastation due to earthquake" plainly
indicates that the financial statement is not delivering an accurate and fair picture of the
company. As a result, in his audit report for fiscal year 2018-19, the auditor must provide an
Adverse Opinion.

Disclaimer of opinion

An auditor's disclaimer of opinion is a statement that no opinion is being expressed on a

client's financial statements. This disclaimer could be made for a variety of reasons. For
example, the auditor may not have been permitted or able to carry out all of the audit
procedures as intended. Alternatively, the client may have limited the scope of the audit to the
point that the auditor was unable to form an opinion. The auditor may be able to deliver a clean
opinion if the client permits the auditor to complete planned work or corrects an underlying
irregularity. The disclaimer remains in effect until the auditor issues a replacement opinion.

2. Based on what you have identified how can the management reverse that opinion to
unmodified or unqualified opinion.

Unmodified or Unqualified Opinion

An unqualified opinion is a conclusion reached by an independent auditor that a

company's financial statements are presented fairly and appropriately, with no material
exceptions, and in accordance with generally accepted accounting rules (GAAP).