What is audit opinion?

Auditor’s opinion is an official presentation of audit results. It helps user of audit report to understand how auditor concluded about audit works which were conducted on the accompanying financial statements of the audited client.

In order to form audit opinion, there are huge works must be done behind (audit working papers), ie. from planning to subsequent review before issuance. By doing numerous audit procedures to obtain sufficient and appropriate audit evidences, the auditor can then conclude whether the accompanying financial statements, in all material aspects, are presented truly and fairly in accordance with applicable accounting standard.

How many types of audit opinion? There are 04.

Pursuant to Paragraph 16 and 17, ISA 700, the Auditor shall express an unqualified opinion when the auditor concludes that financial statements are prepared, in all material aspects, in accordance with the applicable financial reporting framework.

Otherwise if either of following circumstances occurred, the Auditor is required to modify his opinion:

1. Auditor concludes that, based on audit evidences obtained, the financial statements as a whole are not free from material statements; or

2. There are limitations on scopes of works that prevent auditor from obtaining sufficient and appropriate to conclude whether financial statements are free from material statements.

According to ISA 705, each type of modified auditor opinion is formed in following circumstances:

When giving modified audit opinion, the auditor is required to explicitly express basis for modified opinion in the auditor report to strongly support for the conclusive opinion.

It can be said that all audit works and ultimately audit opinion must always be supported by appropriate (quality) and sufficient enough (quantity) audit evidences. It is aimed to provide confidence to user when relying on audit result (ie. audit report) to make relevant economic decision.

References

- ISA 700 – Forming an opinion and reporting on financial statements

- ISA 705 - Modification to the opinion in the independent auditor’s report