Adverse Audit Opinion
Categories: Accounting, Regulations
Like when a so-called friend tells you that your new Tropical Mists-colored pants (which you were very proud of, by the way, because you were finally moving out of your narrow fashion comfort zone like everyone said you should) look like someone switched out your Tide pods for Grape Fanta.
In finance, it's a similar vibe, but much more serious. Adverse opinions in this context come from auditors looking over a company's financial statements. And they aren't adverse opinions like "hey, I think you'd look better if you did something with your bangs." It's more like "your books are a mess and some people in your accounting department might want to contact attorneys."
If an auditor issues an adverse opinion (which rarely happens by the way) it means they think the financial statements dramatically misrepresent the financial situation at the company. Significant restatements and other major consequences can follow.
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Finance: What is Adverse Audit Opinion?27 Views
Finance a la shmoop. What is an adverse audit opinion and you know deficiency
letter. Okay people this is not good you thought you had good grades but when [Report card is thrown onto the desk]
you got your report card your teachers had opinions adverse to yours... [Report card has bad grades in it]
They sent your parents a deficiency letter you know the one with all those [Mom looks shocked]
D's on it well when it's a company's audit that has similarly gone awry it's [Boss looks angry and employee looks shocked]
the nice way to say it well then it means they didn't count the beans
properly when they gave their financial reports to their investors or whoever
the auditors were serving usually this implies that companies overstated how [Employee counting coffee beans]
profitable they really were or how well they were really doing so tens of
thousands of investors if you know the company was public when this all [Big line of people waiting to invest]
happened paid twenty seven dollars and 32 cents a share when with the real
numbers the stock probably should have been trading more at like you know
fourteen dollars and 27 cents a share big difference well basically an auditor
is saying that yours are not bread-and-butter misstatements no oops [Bean report with the numbers crossed out]
it's more of a dude there were material ie important
mistakes and they were pervasive like everywhere math, science, english, history
your failure it's no mystery that's how auditors talk really
all right well then there are massive losses to massive numbers of people who hire [Protesters on a street]
massive numbers of lawyers who sue you.. massively.. in the world of finance an
adverse audit opinion is a bit like running over everyone's favorite dog [Car goes over a bump]
several times only you're the one who is likely dead meat [Guy reverses and runs the dog over again and the owner comes to fight]