In the audit, you will face an assessment from auditor. Related results of the validity and accuracy of financial statements or performance of companies and organizations. These assessments are usually in the form of formal written comments. These statements or comments are called audit opinions.
Every financial and performance report in a company or organization will have comments and assessments on each reporting process in various types, both internal and external.
A completed audit is an audit that has undergone an assessment and evaluation in the form of an audit commentary containing comments and suggestions for actions to be taken.
The report that the auditor gives can be a benchmark for a company's future. In this case, some of the things that auditors should pay attention to is that their comments should be based on concrete evidence.
Other than that, it has also undergone a process of analysis consisting of several stages to produce a clear and accurate assessment of the target for the company and its future organizations.
Let's explore more about the audit opinion and some of its stages, we'll go from the general and specific understanding of the auditor's opinion, then into the function of audit opinion, to examples and so on. Here's the explanation.
Definition of Audit Opinion for Companies
Let's get into the notion or definition. You may have previously met and learned the audit opinion of a company or organization.
How is it made? And what's the audit opinion? Well, generally speaking, an audit opinion is a result of the assessment and evaluation of an audit process by an auditor of a financial report or performance of a company.
Every auditor whether its internal or external will give a formal comment and statement. In the closing part of audit.
Therefore, can also be said as a result of the preparation of such comments or statements. Audit opinion becomes a tool to describe the outcome of an audit and what the auditor gets from a report.
If that was a general statement, let's go to a specific understanding.
In the case of an audit opinion under the SPAP or professional standard of a public accountant, an opinion audit is a comment issued by the auditor after conducting an audit of financial statements based on accounting.
An audit opinion will generally be in the form of a brief statement. However, the length of this brief statement depends on each type and type of audit opinion and also on other factors that influence it.
The example such as proofs which auditor found, liquidity, and others.
Function of Opinion Audit
Once we know what it means both generally and specifically, let's go to the function of the audit opinion. the function of opinion audit checks vary widely.
But the main function of opinion audit as the measurements and guide for the company in conducting reform based on received reports. There is an explanation about some functions of opinion audit.
1. Measurements for Company's Reform and Actions
One of the functions of a commentary on a report is to serve as a measure for the company in making important and significant changes and actions.
So in some cases, a company will take an important action when the report is much improved or below satisfaction.
2. Audit Result Sign
As a formal statement and comment, the function of an audit opinion is as a sign for the outcome of the verification process.
This is a sign that the verification process has been completed and the auditor has performed his duties in accordance with the appropriate steps and stages from the beginning to the end of the process.
Stages Of Audit Opinion
In conducting an audit opinion, there are several stages that need to be done. Here are the key stages in an audit opinion.
Planning
The first stage of the audit opinion is to plan the audit schedule along with methods and procedures. The Auditor and the client company will plan the audit process accordingly in accordance with a common consensus.
Control Control
In this one stage, the auditor will organize and manage control over all financial statements and company performance in accordance with the agreement in the previous planning.
Testing
Going to the next stage, the auditor will test all the evidence in the report and match it with the conditions in the field.
This is where the auditor will find errors in the report that need improvement.
Reporting
After going through various analysis and testing processes, the auditor will provide reports and opinions related to the analysis process that has been carried out.
If the report has no errors, then the auditor will give a slight opinion. And vice versa.
5 Types of Audit Opinion
Until we get to the top of the explanation of the types of audit opinions. So far, the audit opinion is one of the report-forming factors in the outline. There are five types that auditors must adjust to the needs of inspection reports of companies or organizations.
1. Reasonable Opinion Without Exception
The type of audit opinion that gives a positive response and tends to give appreciation to the company's reports.
This type provides some detail explanation no matter the profit or loss of a company in the report.
If the report is complete and in accordance with the evidence, the auditor gives a positive opinion.
See also: What is an unqualified opinion? - Definition, examples and how to get
2. Reasonable Opinion With Exception
It's a type of positive comments from auditor to a company's report, but with some notes and exceptions.
This comments are stated because auditor found some unmatched little notes with proofs in financial reports and work performance of the company.
See also: Fair opinion with exceptions: definition, basis of award, & implicationsa
3. Rejection Opinion
Rejection opinion is one type of audit opinion issued by independent auditors when they are unable to obtain audit evidence to provide an opinion on the financial statements, or when there is material non-compliance with accounting standards that makes the financial statements as a whole unreliable.
In this opinion, the auditors state that they do not express an opinion on the financial statements of the company being audited.
Disclaimer Opinions reflect serious problems in the presentation or disclosure of financial information that can have a major impact on the decisions of users of financial statements, so it is important for stakeholders to pay special attention to these opinions.
4. Unnatural Opinion
Is a type of comment in which the inspector exposes a misrepresentation and explanation in the report that has input errors and information that exposes income and expenses in the company's financial statements.
See also: Unreasonable opinions on Auditing: definition, implications, and how to avoid
5. Opinions Do Not Express Opinions
This is the type of opinion that the auditor refuses to give. This is because there are fatal errors in each report that provide many miscalculations and some discrepancies with the evidence that the auditor finds.
See also: What is opinion not expressing an opinion? - Definition and basis of awarding
Factors that Can Affect Audit Opinion
Once you know the function of the audit opinion, you go into the factors that influence the audit opinion.
This should be one last piece of information so it should be clear and effective. Here are some important factors that influence it.
1.Type of Audit
The first factor that influences is the type of audit. This type varies depending on the needs and interests of the company in checking the report.
This type has several stages that affect the form and outcome of the comment.
2. Size of The Company
The size of a company is also a significant opinion factor. The size of the company affect the size of auditor's comments.
If for an MSME company, then the comments on the inspection process will not be as much as multinational companies such as Google or Amazon.
So, the audit opinion will be the larger a company, the more statements the auditor issues at the end of the report.
3. Company Benefits
When a company has a high and consistent profit ratio will have a few statements and tend to be positive. If a company have a high profit ratio and consistent will have a few statement and relatively positive.
While companies with low profit ratios and inconsistent such ratios will have a lot of opinions.
4. Liquidity and Leverage
Liquidity and leverage or company's debts also affect a comment during audit.
A good liquidity company, that is, paying all its obligations on time and also not having a leverage or loans that are not overwhelming will have a few opinions and tend to be positive.
Examples of Audit Opinion
Once you know some kind of opinion on report checks that vary. Here's an example of the opinion that you often encounter during the report inspection process.
1. Going Concern
Is an example of reasonable opinion without exception. The type of going concern for financial report which shows a uncertainy of company in surviving activity of operation in the future according to audited report.
2. Insidental Notes
There is an example of a kind of reasonable opinion without a note with an additional paragraph containing some notes related to what should be added by the company such as some expenditure outside the budget plan, and so on.
3. Disclaimer of Opinion
Is an example that belongs to the type of opinion does not express an opinion. This example provides an explanation regarding the absence of evidence or the existence of limits in the scope that must be carried out by the auditor for the security and clarity of the audit.
4. Adverse Opinion
In examples that fall into the type of TW or unnatural opinion, this example is evidence of misrepresentation of assets in the report. Thus, the auditor will provide an explanation to the company to complete its assets.
Closing
There is our explanation about audit opinion. An audit opinion is a formal commentary and core explanation issued by the auditor as the final form of a statement and verification process on a report.
Audit opinion has several stages that need to be done by the auditor, so each audit opinion has a different type based on the results and stages.
In many ways, the commentary from the inspector becomes a measure of a company to change its report and take both preventive and solutive actions for their operations.
Well, you can find the audit opinion feature in Audithink. As a trusted audit application with complete and advanced features that make it easier for auditors to carry out various types of audit purposes.
Contact contact Audithink to discuss more about auditing for your company.
