Audit Report Types

Updated on April 4, 2024
Article byWallstreetmojo Team
Edited byWallstreetmojo Team
Reviewed byDheeraj Vaidya, CFA, FRM

Types of Audit Reports Opinions

There are four different types of audit report opinions that can be issued by the company’s auditor based on the analysis of the company’s financial statements. It includes Unqualified Audit Report, Qualified Audit Report, Adverse Audit Report, and Disclaimer Audit Report.

Audit Report is the basis for determining the financial capacity and quality of the company. Also, one can consult the audit report in measuring the company’s performance for the given fiscal year based on which investors will rely on the company and invest their money to enhance their returns.

Audit Report Types

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Key Takeaways

  • Audit report opinions have four different types of the audit report. The company’s auditor provides it based on its financial statements analysis. 
  • The audit report types are clean report, qualified report, adverse audit report, and disclaimer report.
  • The top 4 audit opinion types are unqualified, qualified, adverse, and disclaimer of opinion.
  • Based on each type of audit assignment’s facts and circumstances, the auditor must amend the opinion through professional judgments and justifiable legal opinions.

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Top 4 Audit Report Opinion Types

In the modern corporate world, based on the below audit opinion, types of the audit report is determined:

Sr No.OpinionType of  Audit Report
1UnQualified OpinionClean Report
2Qualified OpinionQualified Report
3Disclaimer of OpinionDisclaimer Report
4Adverse OpinionAdverse Audit Report

Let’s understand each audit report opinion types with an example:

#1 – Clean Report

It is the most common opinion given by the auditors and always expected by the auditee. In this type of audit report, the advice given by the auditor will be unqualified, without any adverse comments or any disclaimer about any clauses or process. As per the auditor, by this report, they are satisfied with the company’s performance and finding its functions in sync with governance and applicable statute.

Example: HSBC Bank-Calendar Year 2018- Unqualified/Clean Audit Report

In our opinion, HSBC (“The Company”) Group financial statements and parent company financial statements:

  • Give a true and fair view of the state of the company’s affairs on December 31, 2018 and the company’s profit and cash flows for the year then ended;
  • Have been prepared under the requirements of the Companies Act 2006, and complying requirements of the Group financial statements, Article 4 of the IAS Regulation; and
  • Have been properly prepared under UK GAAP and IFRSs as adopted by the European Union.

#2 – Qualified Opinion

This type of audit report, an auditor gives when he is not confident about any specific process oThis type of audit report, an auditor gives when he is not confident about any specific process or transaction, based on which they are not in the position to issue Clean/Unqualified Opinion. Investors and organizations do not accept a qualified opinion as it creates a negative impression.

Example: General Format in the UK as per UK GAAP or IFRS

In our opinion, except for the effects of the matter described in the basis for qualified opinion section, the financial statements:

  • Give an accurate and fair view of the state of the company’s affairs as of December 31, 2018 and its profit for the year ended;
  • Have adequately been prepared following the United Kingdom Generally Accepted Accounting Practice / IFRSs as adopted by the European Union; and
  • Have been prepared under the requirements of the Companies Act 2006.

A Basis for Qualified Opinion

The notes to the financial statements do not disclose that one of the company’s directors, John Smith, controls ABC Ltd., from which the company purchased goods and services during the year of xxx. Such disclosure is required by IFRS 102 / IFRSs as adopted by the European Unio].

We have audited as per International Standards on Auditing (UK) (ISAs) and applicable law. We are independent of the company under the ethical requirements relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities under these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.

#3 – Disclaimer Report

Disclaimer reports by auditors distance them from giving any opinion on the financial statements. The main reason for providing the disclaimer of opinion can be reasons like putting a limitation on the scope of the auditors, not obtaining satisfactory explanation and not being able to determine the true nature of transactions, not obtaining sufficient audit evidence, etc. This kind of audit opinion is considered very harsh and creates a negative image.

Example General Format in the UK as per UK GAAP or IFRS

We do not express an opinion on the accompanying financial statements of the company. Because of the significance of the matter described in the basis for the disclaimer of the opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements.

A Basis for Disclaimer of Opinion

We can also not confirm the bank balance (including overdraft) and interest payable thereon since statutory authorities freeze the accounts because of the non-deposition of the statutory dues. As a result, the facility ceased to operate, and they reported the same matter in the previous year.

In addition, we were unable to verify by alternative means balance of accounts receivable and balance of accounts payable and corresponding gain or loss, if any of these balances is not recorded for the year ended December 31, 2018 and reported the same matters in a previous year.

#4 – Adverse Audit Report

An auditor gives an adverse report when he is not satisfied with the financial statements, or there is a high level of material misstatements, irregularities that can breach the trust of investors and the government. Qualified reports are considered the auditor’s primary weapon, which they can use as public accountability. As a responsible professional, the auditor can attract the public’s attention about any non-acceptable approach the companies accept.

Example: General Format in the UK as per UK GAAP or IFRS

In our opinion, because of the lacking of the information mentioned in the basis for the Adverse Opinion paragraph, the financial statements do not present the information required by the Companies Act 2006 as required and also do not give a true and fair view in line of the UK GAAP or IFRS that state of affairs of the company as on December 31, 2018 and its profit/loss and cash flow for the year ended on that date.

A Basis for Adverse Opinion

The company’s borrowings have matured, and the outstanding amount is payable on March 31, 2019. The company cannot take loans, and there are chances of defaulting. These events indicate a material uncertainty about its ability to continue its going concern assumption. Therefore, there are high chances of realizing funds from the sale of assets and paying out its liabilities to continue the business. The financial statements (and notes) do not disclose this fact.


Based on the facts and circumstances of each type of audit assignment, the auditor is needed to modify its opinion by taking professional judgments and acceptable legal opinions.

Frequently Asked Questions (FAQs)

How to revise tax audit report?

The audit report can be revised by obtaining an audit revised report from an accountant, duly signed and verified by an accountant, and by providing the revised report. One must also modify and deliver the report before the end of the applicable assessment year for which the report is concerned.

Is audit report part of financial statements?

A financial statement audit is the entity’s financial statements examination and disclosures by an independent auditor. The examination result is a report by the auditor indicating the financial statements’ presentation aesthetics and concerned disclosures.

Does audit report need to be signed?

Yes, it is mandatory. The audit report must be signed by the ‘Senior Statutory Auditor’ in the individual’s name instead of the firm’s name, for the firm and on the firm’s behalf. Moreover, the firm must be called a ‘statutory auditor’ instead ‘registered auditor.’

Why do we need audit report?

An audit report is critical as it enables credibility to financial statements. In addition, it also provides the shareholders confidence that the accounts are accurate and honest. It can also improvise a company’s internal controls and systems.

This has been a guide to Audit Report Types. Here we discuss the top 4 audit report opinion types, including Clean Report, Qualified Report, Disclaimer Report, and Adverse Audit Report. You may learn more about Accounting from the following articles –