AS 3105: Departures from
Unqualified Opinions and Other
Reporting Circumstances
Departures From Unqualified Opinions
Qualified Opinions
.02 Certain circumstances may require a qualified opinion. A qualified
opinion states that, except for the effects of the matter to which the
qualification relates, the financial statements present fairly, in all material
respects, financial position, results of operations, and cash flows in
conformity with generally accepted accounting principles. Such an opinion is
expressed when—
a. There is a lack of sufficient appropriate evidential matter or there are
restrictions on the scope of the audit that have led the auditor to
conclude that he or she cannot express an unqualified opinion and he
or she has concluded not to disclaim an opinion (paragraphs .05–.17).
b. The auditor believes, on the basis of his or her audit, that the financial
statements contain a departure from generally accepted accounting
principles, the effect of which is material, and he or she has concluded
not to express an adverse opinion (paragraphs .18–.39).
.03 When the auditor expresses a qualified opinion, the auditor's report
must include the same basic elements and communication of critical audit
matters, if requirements of critical audit matters apply, as would be required
in an unqualified auditor's report under AS 3101.
.04 When the auditor expresses a qualified opinion, he or she should
disclose all of the substantive reasons for the qualified opinion in one or
more separate paragraph(s) immediately following the opinion paragraph of
the auditor's report. The auditor should also include, in the opinion
paragraph, the appropriate qualifying language and a reference to the
paragraph that discloses all of the substantive reasons for the qualified
opinion. A qualified opinion should include the word except or exception in a
phrase such as except for or with the exception of. Phrases such as subject
to and with the foregoing explanation are not clear or forceful enough and
should not be used. Since accompanying notes are part of the financial
statements, wording such as fairly presented, in all material respects, when read
in conjunction with Note 1 is likely to be misunderstood and should not be used.
Note: The auditor should refer to AS 3101 to determine if the matter for which
the auditor qualified the opinion is also a critical audit matter.
Adverse Opinions
.40 When the auditor expresses an adverse opinion, the auditor's report
must include the opinion as described in paragraph .41 and the same other
basic elements as would be required in an unqualified auditor's report under
AS 3101, modified appropriately.
Note: The requirements as to critical audit matters described in AS 3101 do
not apply when the auditor expresses an adverse opinion.
.41 An adverse opinion states that the financial statements do not
present fairly the financial position or the results of operations or cash flows
in conformity with generally accepted accounting principles. Such an opinion
is expressed when, in the auditor's judgment, the financial statements taken
as a whole are not presented fairly in conformity with generally accepted
accounting principles.
.42 When the auditor expresses an adverse opinion, he or she should
disclose in a separate paragraph(s) immediately following the opinion
paragraph of the report (a) all the substantive reasons for his or her adverse
opinion, and (b) the principal effects of the subject matter of the adverse
opinion on financial position, results of operations, and cash flows, if
practicable.7 If the effects are not reasonably determinable, the report should
so state.8
.43 When an adverse opinion is expressed, the opinion paragraph should
include a direct reference to a separate paragraph that discloses the basis
for the adverse opinion. An example of this is shown below:
Disclaimer of Opinion
.44 A disclaimer of opinion states that the auditor does not express an
opinion on the financial statements. An auditor may decline to express an
opinion whenever he or she is unable to form or has not formed an opinion as
to the fairness of presentation of the financial statements in conformity with
generally accepted accounting principles. If the auditor disclaims an opinion,
the auditor's report should give all of the substantive reasons for the
disclaimer.
.45 A disclaimer is appropriate when the auditor has not performed an
audit sufficient in scope to enable him or her to form an opinion on the
financial statements.9 A disclaimer of opinion should not be expressed
because the auditor believes, on the basis of his or her audit, that there are
material departures from generally accepted accounting principles
(seeparagraphs .18 through .39). When disclaiming an opinion because of a
scope limitation, the auditor should state in a separate paragraph or
paragraphs all of the substantive reasons for the disclaimer. He or she should
state that the scope of the audit was not sufficient to warrant the expression
of an opinion. The auditor should not identify the procedures that were
performed nor include the paragraph describing the characteristics of an
audit (that is, the scope paragraph of the auditor's standard report); to do so
may tend to overshadow the disclaimer. In addition, the auditor should also
disclose any other reservations he or she has regarding fair presentation in
conformity with generally accepted accounting principles.
Piecemeal Opinions
.48 Piecemeal opinions (expressions of opinion as to certain identified
items in financial statements) should not be expressed when the auditor has
disclaimed an opinion or has expressed an adverse opinion on the financial
statements taken as a whole because piecemeal opinions tend to overshadow
or contradict a disclaimer of opinion or an adverse opinion.
https://www.investopedia.com/ask/answers/122414/what-difference-between-debenture-and-bond.asp
a debenture is a bond that is secured by company assets.
Debentures generally have a more specific purpose than other bonds. While both are
used to raise capital, debentures typically are issued to raise capital to meet the
expenses of an upcoming project or to pay for a planned expansion in business.
Debentures are sometimes called revenue bonds because the issuer expects to repay
the loans from the proceeds of the business project they helped finance.
Debentures are not backed by physical assets or collateral. They are backed solely by
the full faith and credit of the issuer.
https://www.investopedia.com/ask/answers/033015/what-are-different-kinds-shares-public-limited-
company-plc-can-issue.asp
https://investinganswers.com/financial-dictionary/insurance/underwriter-873
