Why are ‘unqualified’ financial statements necessary?

  • When auditors review the company’s financial controls and records, they generally respond with
    • An unqualified opinion, which means that the company’s financial statements give a true and fair view of the company’s financial condition.
    • A qualified opinion, which means that the auditor finds that one or more areas of the financial statements do not conform with proper accounting practice, but that this does not affect the rest of the financial statements from being fairly presented when taken as a whole.
    • An adverse opinion, which means that the auditor found the company’s financial statements to be materially incorrect, unreliable, and inaccurate.
    • A disclaimer of opinion which means that the auditor was unable to form an opinion on the company’s financial statements.
  • D&O underwriters are generally reluctant to insure companies that do not have an unqualified audit as this usually points to poor financial controls which are a potential source of mismanagement claims against the company’s management.
Directors and Officers Liability