The qualified audit report is when the auditor decides to qualify/modify the audit report based on material misstatement in the financial statement. These misstatements are also referred to as discrepancies/qualifications.
It’s important to note that an audit report can be qualified for two reasons.
- material misstatement identified in the financial statement for transactions/account balance/disclosure which is material but not pervasive.
- the auditor’s inability to obtain sufficient and appropriate audit evidence on the balance/transaction that is material but not pervasive. This situation is called scope limitation or the auditor’s inability to obtain sufficient and appropriate audit evidence for the reasonable assurance.
By issuing a qualified audit report, auditors modify their opinion on a portion of the financial statement rather than the financial statement as a whole.
The auditors qualify/modify the report with the following content.
The audited financial statement presents true and fair information except for ‘’account balance name’’. In other words, the financial statement presents a true and fair view except for the account balance containing material misstatement.
Wrap up
An audit report is qualified when some discrepancies are reported in the financial statement. The auditor qualifies the audit report based on misstatements in the financial statement. However, the discrepancy/misstatement is not severe, and its impact is limited to a specific account balance/transaction/disclosure.
Similarly, qualification can be on the basis of auditor’s inability to obtain sufficient and appropriate audit evidence.
Daniyal Khatri, ACCA, is a seasoned bookkeeping specialist with over a decade of experience in designing precise, compliant financial systems. His expertise spans daily transaction tracking, ledger management, and financial record accuracy, ensuring businesses maintain organized, audit-ready books. Daniyal excels at aligning processes with evolving compliance standards, integrating user-friendly tools to automate workflows, and translating regulatory complexities into actionable steps. By combining technical proficiency with a focus on clarity, he empowers organizations to achieve error-free bookkeeping, minimize risk, and build a foundation for informed financial decisions.
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