Fundamental Glossary / Management & Corporate Governance
Auditor Qualifications
Points in the audit report where the auditor disagrees, or is unable to conclude, so the opinion is qualified, adverse, or a disclaimer.
Formula
A clean report is an unmodified opinion. A qualification is stated in the report and answered by the board in the annual report.
What it means
The auditor's opinion is the independent check on whether the statements are fairly presented. A qualification means that check found an exception.
Common subjects are going concern, unprovided losses, inventory the auditor could not count, and receivables the auditor could not confirm.
How to read it
One qualification on a narrow, quantified item is a problem you can size. Repeated qualifications, or a disclaimer because records were inadequate, are a reason to doubt the whole set of numbers.
What to watch
An emphasis-of-matter paragraph is not the same as a qualification. It highlights a disclosure without modifying the opinion. Read which one you have. Do not treat either as routine small print.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.