CONDITIONS FOR STANDARD UNMODIFIED OPINION AUDIT
REPORT
The standard unmodified opinion audit report is issued when the following
conditions have been met:
1. All statements—balance sheet, income statement, statement of changes in
stockholders’ equity, and statement of cash flows—are included in the financial
statements.
2. Sufficient appropriate evidence has been accumulated, and the auditor has
conducted the engagement in a manner that enables him or her to conclude
that the audit was performed in accordance with auditing standards.
3. The financial statements are presented fairly in all material respects in
accordance with U.S. generally accepted accounting principles or other
appropriate accounting framework. This also means that adequate disclosures
have been included in the footnotes and other parts of the financial statements
4. There are no circumstances requiring the addition of an emphasis-of-matter
paragraph or modification of the wording or auditor’s opinion in the report.
When these conditions are met, the standard unmodified opinion audit report for
an audit of a nonpublic company, as shown in Figure 3-1, is issued. The standard
unmodified opinion audit report is sometimes called a clean opinion because there are
no circumstances requiring a modification of the auditor’s opinion. The standard
unmodified opinion audit report is the most common audit opinion. Sometimes
circumstances beyond the client’s or auditor’s control prevent the issuance of an
unmodified (“clean”) opinion. However, in most cases, companies make the appropriate
changes to their accounting records to avoid a qualification or modification by the
auditor.
If any of the requirements for the standard unmodified opinion audit report are not
met, the standard unmodified opinion audit report cannot be issued. Figure 3-2 indicates
the categories of audit reports that can be issued by the auditor. The departures from a
standard unmodified opinion audit report are considered increasingly severe as one
moves down the figure. Financial statement users are normally much more concerned
about a disclaimer or adverse opinion than an unmodified opinion audit report that
contains an additional emphasis-of-matter or other matters paragraph. These other
categories of audit reports are discussed in the following sections
