Many people know the importance of auditing, but few people understand the audit opinion in the audit report. In fact, the audit opinion is the most direct and objective reflection of the financial status of the audited object. This article will introduce you to 4 types of audit opinions in Hong Kong and the implications behind them.
How to understand the audit opinion?
When the auditors complete the audit report, they generally express opinions and statements to the auditee. The main purpose is to determine whether the audited financial statement is a “standard” audit report, that is, an “unqualified” audit report.
A “standard” audit report will reflect two important facts:
First, the auditor’s audit opinion will certify that the standard financial statements have been prepared in accordance with the locally applicable accounting standards.
Second, the financial statements have, in all material respects, fully, fairly, and accurately reflect the auditee’s financial condition, results of operations, and cash flows.
4 kinds of audit report opinions in Hong Kong
1) Unqualified Opinion
As the proof of the “standard” audit report, when the auditor gives this opinion, it represents that the financial affairs of the audit object are true, reasonable, and without objection, and fairly reflect the actual situation.
Moreover, “unqualified opinion” also means that the report does not need to be accompanied by an explanation, there are no important matters that need to be adjusted or disclosed, and the financial report will be regarded as a “standard audit report”, which is the most audited object. possible results.
On the contrary, if the above standards are not met, the auditors are likely to give the following three audit opinions and make relevant explanations for this “non-standard audit report”:
2) Qualified Opinion
The opinion represents that the licensed auditor has reservations about the situation reflected in the financial statements of the audit object but does not have a serious impact on the statements.
In other words, the “qualified opinion” still applies to the relevant provisions of the Hong Kong Accounting Standards and is “fair” as a whole, but it cannot fully satisfy the legality and fairness of the audited statements, or there are circumstances that have an impact on the statements.
The auditor also believes that the authenticity of the statement has been “discounted” due to some special matters, which is regarded as the least severe audit opinion when the auditor cannot issue an “unqualified opinion”.
If the audited object has no plans to go public in recent years, or needs a huge loan, the “qualified opinion” will have little effect.
3) Adverse Opinion
Compared with the above two, the “adverse opinion” is a more direct “denial” of the fairness of the financial statements of the audited object.
Auditors will only issue an “adverse opinion” if they have reviewed the financial statements for “material misstatement and distortion”. The auditor will also be responsible for providing sufficient and appropriate evidence to support the statement.
This also means that the statement does not comply with the relevant provisions of the Hong Kong Accounting Standards and cannot fairly reflect the financial position, operating results, and cash flow.
4) Disclaimer Of Opinion
The “disclaimer of opinion” audit report means that the audit process cannot collect and obtain adequate accounting data so an accurate audit opinion cannot be given on the statements of the audited object.
This does not mean that the audit committee is rejected but is the result of the extensive and limited audit scope. It is impossible to determine whether it is reserved or denied. It is a statement made by the auditor after careful judgment.
The issue of “incapable of expressing an opinion” is likely because the accounting time exceeds the time for keeping accounting data, or it occurs when the relevant activities of the object cannot be confirmed, resulting in the auditor’s inability to express an opinion.
The above information is for reference only. If you have any questions about the Hong Kong audit report or audit opinion, we welcome your inquiry.