The Importance of Audit Reports in Investor Analysis

When an individual (usually a certified public accountant) reviews the financial statements of a company impartially and presents a report for that business, this report is called an audit report in accounting. The financial statements of a company in this definition include items such as: balance sheet, income statement, comprehensive income statement, and cash flow statement.

Types of Audit Reports

A qualified or standard report

is a report that states without any qualification the suitability of the financial statements. When the auditor confirms the quantity and quality of the audit evidence and evaluates the scope of the examination as desirable, he issues such a report.

Qualified opinion

is when the auditor encounters non-compliance with generally accepted accounting standards, but the misstatement or non-compliance is not so fundamental or important as to warrant a disclaimer of opinion. In this case, the auditor adds further explanatory statements in the audit report to inform the users of the financial statements.

Adverse opinion

is when the non-compliance or misstatement with generally accepted accounting standards is such that it generally impairs the usefulness of the presentation. "Very significant and material"

Disclaimer of opinion

is when there is a very fundamental and important limitation on the auditor's ability to perform the audit.