Audit opinion.

In plain English

An audit opinion is the signed statement from an outside accounting firm saying whether the financial statements are free of material misstatement and follow the applicable accounting standards. An unqualified or clean opinion means the auditor found no material problems. A qualified opinion flags a specific exception, an adverse opinion says the statements are materially wrong, and a disclaimer says the auditor could not gather enough evidence to form a view. The opinion covers fair presentation only, not whether the business is a good one or whether next year's numbers will hold up. Auditors also describe critical audit matters, the areas that required the most difficult judgment.

01Why it matters

The opinion is the closest thing to an independent check on the numbers you are reading, and anything other than a clean one is a signal to slow down before trusting the statements.

02The math, step by step

Say an auditor sets materiality at 1 percent of revenue for a company with 500,000,000 dollars of revenue, or 5,000,000 dollars. Uncorrected errors found totaling 900,000 dollars would be documented and discussed, but on their own would not change a clean opinion.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT

04Receipts

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