Imagine The Voice or American Idol, except where the judges are all accountants.
Once auditors have completed an evaluation of a company's financial statements, they issue a document called (without much creativity) the "auditor's opinion." There are three basic types of opinions (the financial equivalent of "marry, date, kill"): an unqualified opinion, a qualified opinion and adverse opinion.
An unqualified opinion might sound like when that pretentious guy at dinner starts spouting off about wine. But in fact, the "unqualified" version is the most common result and by far the most positive. It basically says the auditor approves the results without qualification (thus the name "unqualified"), agreeing that the numbers accurately reflect the company's financial situation.
The qualified opinion is like when you talk about a movie after only seeing the trailer. It outlines ways in which the audit may have been limited...basically saying "everything looked okay that we could see, but we didn't get to look at everything."
Then there's the real bummer. An adverse opinion suggests that the financial statements have serious issues and the auditor is not willing to stand behind them as an accurate portrayal of the company's finances. This option is rarely used. If the auditor has issues with the financial statements, they will often opt for a fourth possibility, known as a disclaimer. This option represents the auditing equivalent of saying "pass"...the auditor issues no opinion and then describes why they couldn't come to an adequate conclusion.
Related or Semi-related Video
Finance: What is Acting Against Recommen...2 Views
finance a la shmoop what is acting against recommendations hmm
let's say you head to the emergency room with stomach pains the doctor in charge [Man driving fast with stomach pains]
says yep you've got appendicitis but I'm brutally
tired so I recommend you go home well odds are if the doc himself had [Doctor in pain with stomach pains]
appendicitis he'd get someone to take that puppy out stat acting against
recommendations is kind of like that just in the financial world if your
broker tells you to do something he wouldn't recommend for his own [Man discussing finance with his broker]
investments well he has a duty to tell you that he wouldn't do that same thing
in his own case that usually happens when some bonehead tells a broker, hey I
want to bet my life savings on this new IPO well why would anyone act against
recommendations well in the case of the doc maybe he's so tired that he's a [Doctor holding scalpel and falls to the floor]
dangerous menace in the O.R... In the case of your broker well maybe there's
something about your specific situation that makes acting against recommendation
the way to go well as long as they tell you that it's against recommendations
well, they're legally in the cure just don't ask that broker to perform
your kidney transplant [Broker walks into office]
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