Modifications to Audit Reports that Do Not Affect the Audit Opinion

Howard B. Levy, CPA

Circumstances requiring modifications to, or departures from, an unqualified auditor's opinion are described, together with appropriate guidance, in AU-C section 705, “Modifications to the Opinion in the Independent Auditor's Report,” for non-SEC entities, including governments, and in Auditing Standard (AS) 3105, Departures from Unqualified Opinions and Other Reporting Circumstances, for SEC issuers and other entities for which an auditor has been engaged to audit and report based on PCAOB standards. Such modifications include qualified opinions, adverse opinions (which are extremely rare), and disclaimers of opinion (which are auditor assertions that an opinion cannot be expressed). Depending on the nature, magnitude, and pervasiveness of the potential effects of the matters in question, as well as their significance to the financial statements, qualified opinions or disclaimers often result from scope limitations or restrictions that may be imposed by clients or by circumstances that preclude the auditor from forming an unqualified opinion.