A qualified opinion is one of the three types of modified opinion that auditor expresses in circumstances where unmodified opinion is not appropriate in auditor’s judgment. Qualified opinion is also known as “except for” opinion. As the name suggests it is a conditional opinion on the financial statements being audited and implies that except for certain item rest of the financial statement is giving true and fair view. For example:
In our opinion, except for the matters discussed in Basis for Opinion paragraph, the financial statements give a true and fair view of financial position of XYZ Company Ltd as at December 31, 20XX and of financial performance and its cash flows for the year ended December 31, 20XX in accordance with International Financial Reporting Standards
In auditor’s report if opinion is modified than auditor shall use appropriate heading for opinion paragraph like “Qualified Opinion”. When auditor’s report is modified to provide a qualified opinion then auditor also includes Basis for Qualified opinion paragraph before opinion paragraph that details the reasons of qualification.
Auditor expresses qualified opinion if:
- auditor obtains sufficient appropriate audit evidence that:
- the effect of detected misstatements arising out of matter at hand can cause material misstatement in the financial statement
- but effect of such misstatements is not pervasive
- auditor is unable to obtain sufficient appropriate audit evidence to form an opinion, however, in auditor’s judgment:
- the effect of undetected misstatements arising out of matter at hand can cause material misstatement in the financial statements
- but effect of such misstatements is not pervasive