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Difference Between a Qualified and Unqualified Audit Report

Audited financial statements are what banks, investors, financial institutions, and creditors look for when businessmen come forward to them for loans or investments. Although this may be tedious and tense, companies need to have them.

Businessmen and women need to know the difference between the two audit reports: qualified and unqualified. But before we can differentiate the two, we must define what an audit report is.

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What is an Audit Report?

In an audit that an auditor performs in a company, the auditor may find issues or problems in a company, and so the auditor writes his opinions and solutions about the audit that he executed. Hence, the auditor makes a report to present to the higher-ups of a company, to the management of the company.

A report of an auditor is an important part of an audit for it contains valuable information from the auditor himself or herself. This report can either be a qualified or unqualified report.

What Does an Audit Report Look Like?

There are a couple of things that are shown in an audit report. After an introduction about an audit that is performed, it has three major segments that contain the details. The following sections are present in an audit report:

  1. The first section—this is where an auditor details what the responsibility is of a company’s management (which is to prepare financial statements and fair internal controls).
  2. The second section—this is where an auditor details their responsibility as an auditor designated for the job and also the nature of the audit that will be done. It is also stated that only the financial statements and internal controls are assessed.
  3. The third section—This is where the opinions of an auditor are stated.

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Difference Between a Qualified and Unqualified Audit Report

Unqualified Audit Report

This is also known as a clean report and is considered to be the most common type of audit report. In this report, an auditor assigned in an audit simply states that a company’s financial statements that have been audited are fairly and correctly presented on their records. It is also stated there that important facts are not hidden and it complies with the accounting standards.

This is a report that shows an auditor’s assumptions that your business has followed conformity with accepted accounting principles and legal requirements. However, this report does not reveal anything about your business is in good standing economically. The unqualified report only states that your financial statements are correct and do not have any important details hidden.

Qualified Audit Report

This is a kind of report that states that a company’s financial records are fairly presented aside from certain area/s. It means that most things related to audit have been dealt with except for a few matters at hand. It is saying to anyone who needs to know that the company in question has accounting methods that do not follow the accounting standards.

An audit report can be unqualified if there is a limitation of scope in the work of an auditor. Aside from that, it is also possible that there is a disagreement between two parties (auditor and management).

However, it should be noted that having a qualified audit report is a sign that a business is deteriorating as it only means that a company’s financial statements are not found to be transparent.

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What is the Distinct Difference between the Two?

The distinct difference between a qualified and unqualified report that separates them from each other is simply the wording in the letter.

In an unqualified report, an auditor will state something along the lines of, “In our opinion, the financial statements give a true and fair view of the financial position of ABC Inc. as of…”

On the other hand, a qualified report will have something along the lines of, “In our opinion, with the exception of some areas, the financial statements give a true and fair view of the financial position of ABC Inc. as of…”

What to Look for When Choosing an Auditing Firm?

Audit firms in Dubai

Farahat & Co is one of the audit firm in Dubai. We are a team of experienced and knowledgeable auditors in Dubai that has handled different kinds of cases from small to great. We deliver the quality service that each client needs.

We are always updated as being on the loop with new updates that the government lays down. Hence, our information is always on point, so we can provide you with the correct ones wherever and whenever you need it.


Jose’s entire educational and professional career has circled around audit and assurance. While in India, he became a CPA and worked as an accountant and an auditor. Afterwards, he relocated to Dubai, where he joined Farahat & Co. as an auditor. He is currently assisting UAE mainland and free zone businesses with their compliance needs. With a reputation for proficiency, quality, and reliability, clients refer to Mr. Jose for independent assessments of organizations structures and operations.