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What is an adverse opinion?

Whether the entity being audited is an issuer or a nonissuer, an adverse opinion would be distributed if there is a material departure from U.S. GAAP (financial reporting issues), and those departures are both deemed material and pervasive by the auditor.

Some reasons for an auditor issuing an adverse opinion will be due to:

1) Insufficient disclosures

2) An unjustified departure from U.S. GAAP

3) An unreasonable accounting estimate

4) An unjustified U.S. GAAP consistency change


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    If the auditor has determined that, after performing all necessary audit procedures, that there are material departures from the conceptual framework, the auditor may issue a modified opinion. The three types of modified opinions include a qualified opinion, adverse opinion, and disclaimer of opinion.

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    A disclaimer of opinion is a type of modified opinion that the audit team would issue if there are audit issues that are both material and pervasive. Audit issues can be better described as scope limitations, meaning the company prevented the audit team from performing the work necessary to form an audit opinion.