Qualified Opinion
An audit opinion indicating that financial statements are fairly presented except for a specific, limited exception noted by the auditor.
What is Qualified Opinion?
A qualified audit opinion is issued when an auditor concludes that a company's financial statements are fairly presented in accordance with GAAP, except for a specific departure from GAAP or a limitation on the scope of the audit. The opinion uses the phrase 'except for' to identify the exception. Qualified opinions can arise from disagreements with management on accounting treatment, failure to apply GAAP in a specific area, or an inability to gather sufficient evidence on a limited portion of the financial statements. While less serious than an adverse opinion (which indicates pervasive misstatement), a qualified opinion signals to investors and creditors that the financial statements have at least one area requiring additional scrutiny.
Example
A company's auditor issues a qualified opinion stating: 'In our opinion, except for the effects of not consolidating subsidiary XYZ as described in Note 7, the financial statements present fairly, in all material respects...' Note 7 explains that management chose not to consolidate a variable interest entity, departing from ASC 810 consolidation requirements. The qualified opinion alerts investors to review Note 7 carefully and consider the impact of the off-balance-sheet entity on total reported leverage.
Source: SEC — Auditor Reports