{"id":399551,"date":"2024-12-18T17:41:34","date_gmt":"2024-12-18T12:11:34","guid":{"rendered":"https:\/\/zerodha.com\/z-connect\/?p=399551"},"modified":"2024-12-18T17:41:34","modified_gmt":"2024-12-18T12:11:34","slug":"qualified-for-an-opinion-or-qualified-opinion","status":"publish","type":"post","link":"https:\/\/zerodha.com\/z-connect\/varsity\/qualified-for-an-opinion-or-qualified-opinion","title":{"rendered":"Qualified for an opinion or qualified opinion?"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">In one of the classes on financial reporting and analysis, my professor once asked us, \u201c<\/span><i><span style=\"font-weight: 400;\">In a company\u2019s annual report, what is the difference between an unqualified Opinion and a Qualified Opinion?<\/span><\/i><span style=\"font-weight: 400;\">\u201d<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Our first reaction was that unqualified sounds like an unverified or unreliable opinion, and qualified sounds like a certified or verified opinion. Our interpretation was far from correct.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">When you study a company\u2019s annual report, you will see a section named Independent Auditor\u2019s Report right before the financial statements.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The first segment of this section is usually called \u201cOpinion.\u201d Opinion is good. Just opinion means unqualified opinion. But it becomes a problem if any other word is mentioned before Opinion.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">An auditor can give three types of unfavorable opinions:<\/span><\/p>\n<p>\n<b><\/b><\/p>\n<ul>\n<li aria-level=\"1\"><b>Qualified Opinion<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">An auditor mentions a \u201cQualified Opinion\u201d when it is unable to find evidence or the necessary information for a particular item in the financial statements.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Sterling &amp; Wilson Solar&#8217;s FY21 annual report contains a Qualified Opinion. At the time, the promoters were the Shapoorji Pallonji Group. Now, the company is Sterling &amp; Wilson Renewable Energy, and it is jointly promoted by Reliance Industries and the Shapoorji Pallonji Group.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">What was the issue? Sterling &amp; Wilson was supposed to receive a loan repayment from its promoters. The promoters had been delaying the repayment, and the authorities and shareholders had raised concerns. The auditor, BSR &amp; Co LLP, was unable to ascertain the full impact of such non-compliance. That is why it signed off on the report with a qualified opinion.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Note that in a qualified opinion, apart from the issue with specific items, the auditor signs off the rest of the financial statements as correctly represented.<\/span><\/p>\n<p>\n<b><\/b><\/p>\n<ul>\n<li aria-level=\"1\"><b>Disclaimer of Opinion<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Sometimes, the promoters, management or some external entity might refuse or be unable to share critical information or evidence to support the presented financial statements. This impairs the auditor\u2019s ability to form or express an opinion. In such cases, the auditor signs off on the report with a Disclaimer of Opinion.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Eveready Industries&#8217; FY20 annual report contained a Disclaimer of Opinion by its auditor, Singhi &amp; Co. Eveready Industries is the popular maker of Eveready Batteries.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Eveready had given loans to related companies but had not received repayments. It had also given guarantees for external loans taken by related companies, which they had failed to repay on time.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The auditor could not fully ascertain the loss allowance from those inter-corporate dealings and could not certify that financial statements provided a true picture of the business. Therefore, it gave a Disclaimer of Opinion.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Anyway, the management at Eveready has changed since then, and the Burmans of Dabur are now promoters in Eveready.<\/span><\/p>\n<p>\n<b><\/b><\/p>\n<ul>\n<li aria-level=\"1\"><b>Adverse Opinion<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">It is the worst of them all.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The FY20 annual report of McLeod Russel India contains an Adverse Opinion by its auditor, Lodha &amp; Co. The auditor stated in the report that the financial statements do not comply with the Indian Accounting Standards and also do not give information as required by the Companies Act 2013.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The auditor explained at length the basis for the Adverse Opinion.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">But let\u2019s conclude that an Adverse Opinion is when the auditor finds material misstatements or outright disagrees with the presented financial statements and information provided by the management.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In summary, a company\u2019s quality of reporting is good if its annual report contains just an Opinion from the auditor. It is bad if the auditor mentions either Qualified Opinion, Disclaimer of Opinion, or Adverse Opinion.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">A qualified opinion is when a minor issue exists, but the rest of the statements can be taken at face value.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">A disclaimer of opinion is when critical information or evidence is not available.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">An adverse opinion is when the auditor disagrees with the entirety of the presented financial statements.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Note that the sample annual reports are from 2020 and 2021. You may look at these old reports for conceptual understanding, but please don\u2019t hold those old reports against those companies today. Always do your own independent research and reach a decision.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In one of the classes on financial reporting and analysis, my professor once asked us, \u201cIn a company\u2019s annual report, what is the difference between an unqualified Opinion and a Qualified Opinion?\u201d Our first reaction was that unqualified sounds like an unverified or unreliable opinion, and qualified sounds like a certified or verified opinion. Our [&hellip;]<\/p>\n","protected":false},"author":242541,"featured_media":381902,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[477],"tags":[1127,342],"class_list":["post-399551","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-varsity","tag-auditor-opinion","tag-fundamental-analysis"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v23.5 (Yoast SEO v26.6) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Qualified for an opinion or qualified opinion? &#8211; Z-Connect by Zerodha<\/title>\n<meta name=\"description\" content=\"My professor once asked us, \u201cIn a company\u2019s annual report, what is the difference between an unqualified Opinion and a Qualified Opinion?\u201d\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/zerodha.com\/z-connect\/varsity\/qualified-for-an-opinion-or-qualified-opinion\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Qualified for an opinion or qualified opinion?\" \/>\n<meta property=\"og:description\" content=\"My professor once asked us, \u201cIn a company\u2019s annual report, what is the difference between an unqualified Opinion and a Qualified Opinion?\u201d\" \/>\n<meta property=\"og:url\" content=\"https:\/\/zerodha.com\/z-connect\/varsity\/qualified-for-an-opinion-or-qualified-opinion\" \/>\n<meta property=\"og:site_name\" content=\"Z-Connect by Zerodha\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/zerodha.social\" \/>\n<meta property=\"article:published_time\" content=\"2024-12-18T12:11:34+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/zerodha.com\/z-connect\/wp-content\/uploads\/2024\/06\/Blog_Cover-25.png\" \/>\n\t<meta property=\"og:image:width\" content=\"700\" \/>\n\t<meta property=\"og:image:height\" content=\"400\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/png\" \/>\n<meta name=\"author\" content=\"Vineet Rajani\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@VineetRajani\" \/>\n<meta name=\"twitter:site\" content=\"@zerodhaonline\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Vineet Rajani\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/zerodha.com\/z-connect\/varsity\/qualified-for-an-opinion-or-qualified-opinion\",\"url\":\"https:\/\/zerodha.com\/z-connect\/varsity\/qualified-for-an-opinion-or-qualified-opinion\",\"name\":\"Qualified for an opinion or qualified opinion? &#8211; Z-Connect by Zerodha\",\"isPartOf\":{\"@id\":\"https:\/\/zerodha.com\/z-connect\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/zerodha.com\/z-connect\/varsity\/qualified-for-an-opinion-or-qualified-opinion#primaryimage\"},\"image\":{\"@id\":\"https:\/\/zerodha.com\/z-connect\/varsity\/qualified-for-an-opinion-or-qualified-opinion#primaryimage\"},\"thumbnailUrl\":\"https:\/\/zerodha.com\/z-connect\/wp-content\/uploads\/2024\/06\/Blog_Cover-25.png\",\"datePublished\":\"2024-12-18T12:11:34+00:00\",\"author\":{\"@id\":\"https:\/\/zerodha.com\/z-connect\/#\/schema\/person\/25ae5ce64956ef503915290e0db25fe1\"},\"description\":\"My professor once asked us, \u201cIn a company\u2019s annual report, what is the difference between an unqualified Opinion and a Qualified Opinion?\u201d\",\"breadcrumb\":{\"@id\":\"https:\/\/zerodha.com\/z-connect\/varsity\/qualified-for-an-opinion-or-qualified-opinion#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/zerodha.com\/z-connect\/varsity\/qualified-for-an-opinion-or-qualified-opinion\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/zerodha.com\/z-connect\/varsity\/qualified-for-an-opinion-or-qualified-opinion#primaryimage\",\"url\":\"https:\/\/zerodha.com\/z-connect\/wp-content\/uploads\/2024\/06\/Blog_Cover-25.png\",\"contentUrl\":\"https:\/\/zerodha.com\/z-connect\/wp-content\/uploads\/2024\/06\/Blog_Cover-25.png\",\"width\":700,\"height\":400},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/zerodha.com\/z-connect\/varsity\/qualified-for-an-opinion-or-qualified-opinion#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/zerodha.com\/z-connect\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Varsity\",\"item\":\"https:\/\/zerodha.com\/z-connect\/category\/varsity\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"Qualified for an opinion or qualified opinion?\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/zerodha.com\/z-connect\/#website\",\"url\":\"https:\/\/zerodha.com\/z-connect\/\",\"name\":\"Zerodha product and business updates\",\"description\":\"Z-Connect is Zerodha&#039;s official blog. Get the latest updates, product announcements news, and insights all in one place.\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/zerodha.com\/z-connect\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/zerodha.com\/z-connect\/#\/schema\/person\/25ae5ce64956ef503915290e0db25fe1\",\"name\":\"Vineet Rajani\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/zerodha.com\/z-connect\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/zerodha.com\/z-connect\/wp-content\/uploads\/2024\/02\/Vineet-96x96.png\",\"contentUrl\":\"https:\/\/zerodha.com\/z-connect\/wp-content\/uploads\/2024\/02\/Vineet-96x96.png\",\"caption\":\"Vineet Rajani\"},\"description\":\"Content, Zerodha Varsity\",\"sameAs\":[\"https:\/\/www.linkedin.com\/in\/vineet-rajani-cfa-b40b92123\/\",\"https:\/\/x.com\/VineetRajani\"],\"url\":\"https:\/\/zerodha.com\/z-connect\/author\/vineet\"}]}<\/script>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"Qualified for an opinion or qualified opinion? &#8211; Z-Connect by Zerodha","description":"My professor once asked us, \u201cIn a company\u2019s annual report, what is the difference between an unqualified Opinion and a Qualified Opinion?\u201d","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/zerodha.com\/z-connect\/varsity\/qualified-for-an-opinion-or-qualified-opinion","og_locale":"en_US","og_type":"article","og_title":"Qualified for an opinion or qualified opinion?","og_description":"My professor once asked us, \u201cIn a company\u2019s annual report, what is the difference between an unqualified Opinion and a Qualified Opinion?\u201d","og_url":"https:\/\/zerodha.com\/z-connect\/varsity\/qualified-for-an-opinion-or-qualified-opinion","og_site_name":"Z-Connect by Zerodha","article_publisher":"https:\/\/www.facebook.com\/zerodha.social","article_published_time":"2024-12-18T12:11:34+00:00","og_image":[{"width":700,"height":400,"url":"https:\/\/zerodha.com\/z-connect\/wp-content\/uploads\/2024\/06\/Blog_Cover-25.png","type":"image\/png"}],"author":"Vineet Rajani","twitter_card":"summary_large_image","twitter_creator":"@VineetRajani","twitter_site":"@zerodhaonline","twitter_misc":{"Written by":"Vineet Rajani","Est. reading time":"4 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/zerodha.com\/z-connect\/varsity\/qualified-for-an-opinion-or-qualified-opinion","url":"https:\/\/zerodha.com\/z-connect\/varsity\/qualified-for-an-opinion-or-qualified-opinion","name":"Qualified for an opinion or qualified opinion? &#8211; Z-Connect by Zerodha","isPartOf":{"@id":"https:\/\/zerodha.com\/z-connect\/#website"},"primaryImageOfPage":{"@id":"https:\/\/zerodha.com\/z-connect\/varsity\/qualified-for-an-opinion-or-qualified-opinion#primaryimage"},"image":{"@id":"https:\/\/zerodha.com\/z-connect\/varsity\/qualified-for-an-opinion-or-qualified-opinion#primaryimage"},"thumbnailUrl":"https:\/\/zerodha.com\/z-connect\/wp-content\/uploads\/2024\/06\/Blog_Cover-25.png","datePublished":"2024-12-18T12:11:34+00:00","author":{"@id":"https:\/\/zerodha.com\/z-connect\/#\/schema\/person\/25ae5ce64956ef503915290e0db25fe1"},"description":"My professor once asked us, \u201cIn a company\u2019s annual report, what is the difference between an unqualified Opinion and a Qualified Opinion?\u201d","breadcrumb":{"@id":"https:\/\/zerodha.com\/z-connect\/varsity\/qualified-for-an-opinion-or-qualified-opinion#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/zerodha.com\/z-connect\/varsity\/qualified-for-an-opinion-or-qualified-opinion"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/zerodha.com\/z-connect\/varsity\/qualified-for-an-opinion-or-qualified-opinion#primaryimage","url":"https:\/\/zerodha.com\/z-connect\/wp-content\/uploads\/2024\/06\/Blog_Cover-25.png","contentUrl":"https:\/\/zerodha.com\/z-connect\/wp-content\/uploads\/2024\/06\/Blog_Cover-25.png","width":700,"height":400},{"@type":"BreadcrumbList","@id":"https:\/\/zerodha.com\/z-connect\/varsity\/qualified-for-an-opinion-or-qualified-opinion#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/zerodha.com\/z-connect\/"},{"@type":"ListItem","position":2,"name":"Varsity","item":"https:\/\/zerodha.com\/z-connect\/category\/varsity"},{"@type":"ListItem","position":3,"name":"Qualified for an opinion or qualified opinion?"}]},{"@type":"WebSite","@id":"https:\/\/zerodha.com\/z-connect\/#website","url":"https:\/\/zerodha.com\/z-connect\/","name":"Zerodha product and business updates","description":"Z-Connect is Zerodha&#039;s official blog. Get the latest updates, product announcements news, and insights all in one place.","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/zerodha.com\/z-connect\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/zerodha.com\/z-connect\/#\/schema\/person\/25ae5ce64956ef503915290e0db25fe1","name":"Vineet Rajani","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/zerodha.com\/z-connect\/#\/schema\/person\/image\/","url":"https:\/\/zerodha.com\/z-connect\/wp-content\/uploads\/2024\/02\/Vineet-96x96.png","contentUrl":"https:\/\/zerodha.com\/z-connect\/wp-content\/uploads\/2024\/02\/Vineet-96x96.png","caption":"Vineet Rajani"},"description":"Content, Zerodha Varsity","sameAs":["https:\/\/www.linkedin.com\/in\/vineet-rajani-cfa-b40b92123\/","https:\/\/x.com\/VineetRajani"],"url":"https:\/\/zerodha.com\/z-connect\/author\/vineet"}]}},"jetpack_featured_media_url":"https:\/\/zerodha.com\/z-connect\/wp-content\/uploads\/2024\/06\/Blog_Cover-25.png","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/zerodha.com\/z-connect\/wp-json\/wp\/v2\/posts\/399551","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zerodha.com\/z-connect\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zerodha.com\/z-connect\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zerodha.com\/z-connect\/wp-json\/wp\/v2\/users\/242541"}],"replies":[{"embeddable":true,"href":"https:\/\/zerodha.com\/z-connect\/wp-json\/wp\/v2\/comments?post=399551"}],"version-history":[{"count":3,"href":"https:\/\/zerodha.com\/z-connect\/wp-json\/wp\/v2\/posts\/399551\/revisions"}],"predecessor-version":[{"id":399554,"href":"https:\/\/zerodha.com\/z-connect\/wp-json\/wp\/v2\/posts\/399551\/revisions\/399554"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zerodha.com\/z-connect\/wp-json\/wp\/v2\/media\/381902"}],"wp:attachment":[{"href":"https:\/\/zerodha.com\/z-connect\/wp-json\/wp\/v2\/media?parent=399551"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zerodha.com\/z-connect\/wp-json\/wp\/v2\/categories?post=399551"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zerodha.com\/z-connect\/wp-json\/wp\/v2\/tags?post=399551"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}