Looking for a qualified opinion audit report example? Learn about the key components of a qualified opinion audit report and what it means for your business.

Whenever auditors of the company are not satisfied with any explanation or information which are given to them or if they are not satisfied with the preparation and presentation of profit and loss account or balance sheet or if the accounts presented by the directors call for further explanation, firstly auditors must ask the management to make the necessary changes in the profit and loss or balance sheet. But if they do not make changes in profit and loss account or balance then auditors must write these qualifications in their report. Such a report is called a qualified report.

 CIRCUMSTANCES OR STEPS FOR QUALIFIED AUDIT REPORT

1. NO PROPER BOOKS

A qualified report is issued when proper books of accounts have not been maintained by the business concern under the provisions of companies ordinance 1984.

2. EXPENDITURES NOT FOR COMPANY’S OBJECTIVES

The expenditures incurred must be for the company ’s business. If auditors find any expense incurred other than business objective he may state in the report.

3. DISAGREEMENT

The figures of financial statement must tally with the figures recorded in journal and ledgers. If auditors find difference in figures then they present a qualified report.

4. MISAPPLICATION OF ACCOUNTING POLICIES

If any wrong accounting policy is applied that is also considered a type of qualification, auditors may write this fact in audit report.

5. INVESTMENT NOT FOR COMPANY’S OBJECTIVES

Investment made ’ by company must be for company’s objectives, If investment is made during the year is not according to the objects of company, the auditors may issue a qualified report.

6.NO EVIDENCE

If transactions are passed in books of accounts for purchase of assets and auditor is unable to obtain evidence of their existence due to non availability of proper vouchers then such qualified opinion can be expressed.

7.NO ACCESS TO BOOKS

If management refuses to show the books of accounts or other relevant record to the auditor and auditor becomes unable to collect true information necessary for the purpose of audit, the qualified report can be presented to the shareholders.

8.NO ZAKAT DEDUCTIONS

If management failed to deduct Zakat as required by law. then auditor may present this weakness in his report.

9.INFORMAL STATEMENTS

If company prepares the statements without format mentioned in fourth and fifth schedules of companies ordinance 1984, the auditor can mention such weakness in the report.

Qualified Opinion Audit Report Example

SPECIMEN OF QUALIFIED REPORT

The Shareholders,

MAC Limited,

Karachi.

Gentlemen,

We have audited the annexed balance sheet of MAC Company Limited as at 31^st December 2002 and the related profit and loss account and Cash How statement, together with the notes forming part thereof, for the year then ended .nd we state that we have obtained all the information Much to the best of our knowledge and belief were necessary for the purposes of our audit and, after due verification thereof, we report that:

• Company has not provided depreciation amounting to Rs. 5,000.
• Closing inventory is stated in the financial statements at cost whereas market value of inventory is lessor than cost by Rs 8000.

• Payable salaries Rs. 10,000 are not disclosed.

Except for above, we state that

• in our opinion, proper books of account have been kept by the company as required by the Companies Ordinance, 1984.
• In our opinion,
• the balance sheet and profit and loss account together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of account and are further in accordance with accounting policies consistently applied:
• the expenditure incurred during he year was for the purpose of the company’s business; and
• the business conducted, investments made and the expenditures incurred during the year were in accordance with the objects of the company;
• in our opinion and to the best of our information and according to the explanations given to us. the balance sheet, profit and loss account and the cash How statement, together with the notes forming part thereof, give the information required by the Companies Ordinance 1984. in the manner so required and respectively give a true and fair view of the state of company’s affairs as at 31^s1 December 2002 and of the profit/(loss) and the changes in financial position for the year then ended; and

in our opinion Zakat deductible at source under the Zakat and Usher Ordinance, 1980, was deducted by the company and deposited in the Central Zakat fund established under section 7 of that ordinance

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in [Country]. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

Basis for Qualified Opinion

We have conducted our audit according to the auditing standards. However, we were unable to obtain sufficient appropriate audit evidence concerning [describe the nature of the limitation on the scope of the audit, e.g., inventory counts, lack of access to certain records, etc.], which could potentially affect the valuation and classification of [describe the affected item, e.g., inventory, investments]. Consequently, we have not been able to obtain sufficient assurance that the financial statements are free from material misstatement related to these issues.