3 Comments

  1. Dianne Clemens
    August 1, 2014 @ 11:10 am

    Well said, I hadn’t actually looked at the audit report terminology that way before. Although I always thought that it was quiet brave of an audit to make the state based on an annual visit and audit of the organisation without knowing of any financial issues that have arisen throughout the year.

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  2. Mark Richardson
    August 2, 2014 @ 7:08 pm

    Well done Ted and good to see that it has helped to enlighten (at least one person).

    My experience indicates that for those organisations with less than ideal control systems, then the Auditor is obliged to undertake additional work (substantive tests) to satisfy themselves that the opinion given is appropriate. In short, for those organisations an unqualified opinion is more reliable (to the extent that it is less likely that a material misstatement).

    In my younger years as auditor, there were many audits where the Audit Partner did not want to conduct a compliance based Audit (a reliance on the organisations controls) and instead insisted on a close to a 100% substantive based Audit. However, materiality (around 5% of total revenue and/or assets) did play a part in leading to an unqualified Audit opinion.

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  3. Lance T Stone
    August 4, 2014 @ 9:17 am

    Thanks Ted for this analysis. The complexities of the English language continue to challenge as always.
    A much greater emphasis in the “Opinion” section of an audit report is when there is a “Qualification” statement.
    This rings warning bells loud and clear and can seriously impact the organisations financial viability. Certainly financial institutions and the ATO get very nervous when this occurs. It can also be detrimental in the not for profit sector when the organisation is submitting tenders for work.
    In my experience having this type of wording limits the capacity of the organisation to recover financially and potentially be the coup de grâce for the business unless there are stringent administrative processes implemented very quickly.

    Reply

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