What is a disclaimer of opinion?

It is a term used when there is a conflict of interest on the audit work or the auditor is not independent to execute the audit; in such cases when clients give a limitation on scope of the audit thereby restricting full audit investigations and providing auditor with inadequate evidence.

Disclaimer of opinion means the auditor has not been provided with sufficient data, cooperation, working environment & any other limitation to complete his audit.

A disclaimer audit opinion is the most awful audit report that can be received by a company. The disclaimer letter is issued by the auditor to specify that they are not able to form an opinion on the company’s financial statements.

The auditor may issue a disclaimer of opinion, that is, publicly report that the auditor has chosen not to issue an opinion. This may occur when

• Auditors decide they cannot be impartial or independent regarding the company or organization audited.
• The auditor's scope of coverage was substantially limited.
• The auditor has significant uncertainties regarding the appropriateness of parts or all of the financial reports.

An external auditor’s judgment that it is impossible to give an audit opinion on an entity’s financial statements. Disclaimers are issued when an auditor is faced with the following types of problems:

(i) insufficient audit evidence,

(ii) scope limitations, or

(iii) material uncertainties surrounding an organization’s financial health.

In the event the auditor is unable to complete the audit report due to absence of financial records or insufficient cooperation from management, the auditor issues a disclaimer of opinion. This is an indication that no opinion over the financial statements was able to be determined. A disclaimer of opinion is not an opinion itself.

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A disclaimer of opinion is basically given by the auditor that do not laydown any sort of opinion with regard to the financial position and condition of the company. There are many factors that may led to that. One example is the limitation of scope that is imposed by the client, as a result the auditor is not able to obtain sufficient appropriate audit evidence.

A Disclaimer of Opinion is issued in either of the following cases: When the auditor is not independent or when there is conflict of interest. When the limitation on scope is imposed by client, as a result the auditor is unable to obtain sufficient appropriate audit evidence.

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Disclaimer of opinion is basically a statement provided by the auditor that doesn’t lay down any sort of opinion with regard to the financial position and condition of the company. Disclaimer of opinion is provided by certified public accountant wherein he clarifies that an audit related opinion/statement cannot be provided owing to limitations of the examinations conducted.

In simple words when there is any limitation due to which external auditor is not be able to obtain sufficient appropriate audit evidence, the auditor will not issue any openion. Report will concluded as we are not be able to obtain sufficient appropriate audit evidence therefore we are not issuing any opinion. If the affect is persuasive to the financial statements than no opinion will be issued however if the affect is not persuasive and can be isolated, in that case auditor will issue except for opinion.

A disclaimer is generally any statement intended to specify or delimit the scope of rights and obligations that may be exercised and enforced by parties in a legally recognized relationship.