OUR AUDIT OPINION

The objective of a financial statement audit is to express an opinion on whether the financial statements have been prepared, in all material respects, in accordance with the applicable financial reporting framework or whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework. Audit opinion falls into two broad categories; unmodified or unqualified audit opinion and modified audit opinion.

The auditor is required to express an unmodified or unqualified audit opinion when the auditor is satisfied that the financial statements have been prepared, in all material respects, in accordance with the applicable financial reporting framework or that the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework . How the auditor writes his opinion will depend on whether the audited entity prepares its financial statements to a fair presentation framework or a compliance framework.  In the case of an unmodified opinion expressed on a set of financial statements prepared to a fair presentation framework the auditor will state that the financial statements are presented fairly, in all material respects, in keeping with the applicable financial reporting framework. Where the financial statements are prepared in accordance with a compliance framework the auditor should state that the financial statements have been prepared, in all material respects, in accordance with the applicable financial reporting framework.

The auditor can modify his opinion in three different ways: the auditor can either issue a qualified opinion or a disclaimer of opinion; and the auditor can also express an adverse opinion depending on the circumstances surrounding the modification of the audit opinion. The form of audit opinion expressed depends on whether the effects of events leading up to the issuance of the opinion are material or pervasive to the understanding of the financial statements.

A qualified audit opinion is issued when the auditor concludes that a misstatement is material, but not pervasive, to the financial statements; this simply means that the financial statements as a whole are not materially misstated. A qualified opinion is expressed as being "except for" the effects of the matter to which the qualification relates. A scope limitation, the effect of which is material to the understanding of the financial statements, could lead to the auditor being unable to obtain sufficient appropriate audit evidence; such a situation could also prompt the auditor to issue a qualified opinion.

A disclaimer of opinion is expressed when the auditor is not able to obtain sufficient appropriate audit evidence due to effects or possible effects of limitation of scope which are both material and pervasive in nature; the auditor will simply state that he is unable to express an opinion on the financial statements due to the significance of the effects or possible effects of scope limitation.

An adverse opinion is expressed when the auditor does not believe that the financial statements are presented fairly, in material respects, in conformity with the applicable financial reporting framework – when financial statements are prepared based on a fair presentation framework. When expressing an adverse opinion on a set of financial statements prepared to a compliance framework, the auditor will state that, ‘in our opinion, the financial statements have not been prepared, in all material respects, in accordance with’ the applicable financial reporting framework. A misstatement in the financial statements that is both material and pervasive will lead to an adverse opinion being expressed on the financial statements.