Nature of Report
Positive audit reports or unqualified opinions indicate the financial statements of the company remain consistent with the previous years and comply with the Generally Accepted Accounting Principles (GAAP).
Negative audit reports or adverse opinion audit reports indicate the company’s financial statements are deceptive, inconsistent, and not compliant with GAAP.
The audit report could also be a mix of the two, stating anything in between, or that some statements or some items in the financial statements do not comply with GAAP or are inconsistent. A Qualified Opinion audit report indicates some exception to certain accounting applications in the current financial year, the full implication or outcome of which remains uncertain.
Audit reports remain the opinion of the auditors, and are not sacrosanct. The independent nature of the auditors nevertheless provides an objective review of company finances and compliance. Investors, creditors, regulatory authorities, and even customers looking for long term relationship with the company place high value on audit reports. Private company find the going tough with a negative audit report, as it remains a blot and investors and other stakeholders may shun the company.