What is in an Audit Report

When you recieve your audit report on your financial statement, it is usually meant to give your business that good opinion or to let you know whether it is healthy. On the other side of the table, your auditor can indicate that the statements found are misleading and cant be relied on. This type of audit report is known as the adverse opinion. That is the upper hand that your auditor has over your business is that they can give you an adverse opinion and make your business look bad. Having the threat of getting that adverse opinion makes more companies change their accounting practices and upgrade their disclosure techniques, which help them to avoid the problem of getting that adverse opinion. The SEC will suspend the trading of a business if the auditor gives that company an adverse opinion.

If a company recieves a report from the CPA company doing the audit, that says they doubts the capabilities of that business to maintain its status as a going concern ( note: a going concern is a company that has the financial means and the momentum to go on operating in the future and that they will be able to turn the bad situation around without defaulting on any of its current liabilities). In this case you may find that some companies may be showing distress but will still be a going concern, unless of course the auditor finds reason to believe it is not. If your company doesnt look good on paper you will need to start working today to ensure your accounting standards and your disclosure is up to par before you get that adverse opinion.