What is Qualified Audit Opinion?
A qualified audit opinion is an audit report in which the external auditor concludes that the financial statements are fairly presented except for a specific, identifiable issue. It signals a material misstatement or a scope limitation that is not pervasive enough to warrant an adverse opinion or disclaimer.
How It Works
- Auditor identifies a material misstatement or scope limitation.
- Issue is significant but not pervasive across the financial statements.
- The ‘except for’ paragraph isolates the specific area of concern.
- All other parts of the statements are deemed fairly presented.
- Lenders and regulators review the qualified item before extending credit.
Saudi Context
Saudi auditors registered with SOCPA follow the International Standards on Auditing (ISA), aligning qualified opinions with ISA 705. CMA-listed companies that receive a qualified opinion must disclose the issue to the market within working days of the report’s release.
Example
An auditor cannot confirm SAR 4.2M of inventory held at a remote warehouse. The auditor issues a qualified opinion stating the financial statements are fairly presented ‘except for’ the effects of any adjustments that might have been required to inventory.