Standards-Based Decision Making - Essay Example

ditors are required to state whether an audit client has complied with the Generally Accepted Accounting Principles (G.A.A.P) when preparing financial statements (Williams, 2006). Green and Associates is an external audit firm to ABC Corporation. The audit firm may provide any of the four types of the audit opinions after completing a corporate financial audit on ABC Corporation’s financial statements. Green and Associates may provide an unqualified or ‘clean’ opinion of the company’s financial statements.

An unqualified opinion is only provided when an audit firm ascertains that a company’s financial statements reflect a truthful opinion of its financial operations. The opinion also indicates that the company’s financial statements are in compliance with the G.A.A.P. An unqualified opinion is the best audit report that a company can receive from its auditors. In our opinion, ABC Corporation’s financial records provide an honest and fair view of its financial operations during the fiscal year ended 31th August and are in compliance with the Generally Accepted Accounting Principles.

An unqualified opinion may warrant an explanatory paragraph if the auditors feel that certain disclosures in the financial statements require a detailed explanation or when there is a change of auditors. It arises when the financial records indicate some minor deviations from G.A.A.P. The explanatory paragraph includes a detailed explanation of the auditor’s opinion. In our opinion, ABC Corporation’s financial statements require modification to expel the minor inconsistencies with the G.A.A.P, despite reflecting a true and fair view of the company’s financial operations.

An audit report may provide a qualified or an ‘except for’ opinion after completing a corporate financial audit. Green and Associates may provide a qualified opinion if it believes that ABC corporation’s financial records are not in compliance with the G.A.A.P, despite representing a true