A disclaimer of opinion is a statement made by an auditor that no opinion is being given regarding the financial statements of a client. This disclaimer may be given for several reasons. For example, the auditor may not have been allowed or been able to complete all planned audit procedures. Or, the client restricted the scope of the examination to such an extent that the auditor was unable to form an opinion. If the client allows the auditor to complete planned work, or rectifies an underlying irregularity, then the auditor may be able to issue a clean opinion. Until the auditor issues a replacement opinion, the disclaimer remains in force.
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.
This kind of an opinion/statement makes it evident that the auditor isn’t in a position to provide a particular opinion with regard to the company’s overall financial status based on its financial statements or records. Such a statement is issued if there is any sort of irregularity, which the auditor fails to reconcile based on his/her satisfaction.
A disclaimer once provided by the auditor remains effective till the time the client incorporates the required adjustments to the financial records, which further ensures that the documents fully comply with the accounting related statements. Once the adjustments have been made the auditor can consider re-evaluating the financials and find out whether all the outstanding matters have been appropriately resolved or not. The moment the auditor issues an opinion, the disclaimer of opinion issued by him/her previously is considered to be null and void.
As per GAAS (Generally Accepted Auditing Standards), the auditors are required to either issue a disclaimer of opinion after an audit or provide an opinion with regard to the financial condition and statements as a whole.
In fact a disclaimer of opinion doesn’t really implicate that the auditor is suspecting some kind of impropriety happening with the financial statements and records. If required, the documents aren’t provided for the purpose of justifying the line related items registered in the accounting statement/records and the auditor may in such a case come to the conclusion that it isn’t possible to provide an opinion around that time. Similarly, if enough documents are available but the financial record maintenance doesn’t comply with the GAAS, then in such a case the auditor is most likely to provide a disclaimer of opinion. In addition to this, the auditor will also look at encouraging his/her client and suggest him/her to seek advice and services from a professional and reputed accountant so that the records can be put in order.