The unqualified opinion refers to the opinion that the auditors from the audit firm in Johor Bahru would express when they do not find any material misstatements or discrepancies in the financial statements of the company. This means that the statements are presenting the true and fair view of the company’s financial position to the best of the auditors’ knowledge. Before issuing such an opinion, the auditors (Also see Audit Committee – Its Definition, Responsibilities and Requirements) need to carry out substantial procedures to assess the processes and policies the company is implementing and collect sufficient evidence to justify his findings.
An unqualified opinion in the company’s audit report can enhance its overall goodwill. Thus, the company can maintain a positive and clean image in the eyes of its prospective and existing clients. Besides, it gives reasonable assurance to the government, shareholders, management, investors and potential investors, as well as its lenders and creditors about the company’s operations and financial statements.
A qualified opinion is the opposite of the unqualified opinion. If the auditors issue this type of audit (Also see Audit Objectives of Different Types of Audit) opinion, it means that based on the audit that the auditors have conducted on the previous year’s financial statements, as well as the practices and controls the company has implemented, the company’s financial statements do not show the true and fair view of its financial position.
Advantages
– For the shareholders, unqualified audit (Also see Guidelines on Auditing a Corporate Department) opinion may act as an assurance that a third party has assessed the work of the company’s management thoroughly, and the numbers are reliable. Thus, they can re-establish the trust that the management has used their money optimally.
– An unqualified opinion is an additional evidence that the management has completed their work well throughout the year, and this shows their competency that leads to the improvements in innovation, procedures and the increment in employee’s salary.
– Potential investors may have a more in-depth understanding of the company, and they can depend on it when they want to make a decision on investment.
– The unqualified opinion will give reasonable assurance to the government as such an opinion proves that the company is not involved in any malpractices and has not broken any rules.
– For creditors and lenders, an unqualified opinion will increase the trustworthiness of a company. This helps in building a better image of the company so that in the future, it can raise its debt more easily at lower rates if necessary. Also, this indicates that the company is capable of fulfilling its current contractual obligations promptly.
– Getting an unqualified opinion also means cheaper audit (Also see Auditing the Sales and Collection Cycle) fees since the auditors do not need to spend a long time collecting the required data and evidence. Thus, this leads to fewer working hours, and the company being audited can save extra fees.
Limitations
Even though the auditors have performed thorough assessments of procedures and policies and collected evidence for the audit opinion they have issued, the audit risk is still present. This is because the opinion the auditors have issued can be incorrect if the management has manipulated the information or the auditors have misinterpreted the information the company’s management has provided. As a result, this can cause the users of the financial statements to draw incorrect conclusions and make inappropriate decisions or have unrealistic expectations.