 Hello, and welcome to this session. This is Professor Farhad in which we would look at conditions for unmodified opinion Unmodified opinion is the best opinion is a clean opinion and most common opinion are unmodified opinion So the majority of opinions 99% of the opinions are Unmodified sometimes I might use the word unqualified unqualified is for the PCAOB, which is the public issuer AI CPA is the private Issuer just FYI in case I said unqualified by mistake unmodified is a clean opinion and the client will complies even if the Opinion is not clean yet is not unmodified The the client will make the appropriate changes to have a clean opinion Because you want to have a clean opinion Otherwise you'll get in the trouble with your investors with your creditors especially with your creditors as well as with your investors and the public at large You really don't want to have something other than unmodified or a clean opinion So what are the conditions to have a clean opinion? There are four conditions has have to be met before you have a clean opinion The first condition is this all statements, which is the balance sheet the income statements statements of stockholders Equity and the cash flow plus the disclosure, which is the notes. So simply put The financial statements and the notes are included. You have to have all of those That's one two. You have to have sufficient and appropriate evidence sufficient and appropriate evidence That's gathered and the auditor conduct the audit in accordance with the applicable auditing standard Whatever that applicable auditing standard is whether it's a US gas or the international auditing standard So you have enough evidence to be comfortable to be comfortable doing what is showing a clean opinion So you collected the evidence Three the financial statements Present fairly and or material respect in accordance with the appropriate accounting framework here The accounting framework for the US could be gap simply put Aqued disclosures has been included in the footnotes and other parts of the financial statements and the financial statements are presented Fairly presented in accordance with gap now gap could be IFRS depending on which framework you are using So simply put let's look at point two and point three point two saying you have collected all the evidence according to gas or international auditing standards Here what we are saying is you did follow gap or IFRS whichever framework you are using Also, there are no circumstances requiring the addition of an emphasis of matter paragraph or modification of the wording Or the auditor's opinion in the report now You would still have unmodified opinion if you have an emphasis of a matter So you could have an unmodified opinion and emphasis of a matter Sometime you might have an unmodified opinion plus a required Emphasis of a matter you would still have an unmodified opinion now have a whole recording about Emphasis of a matter or other matter which is a modification of the wording of the or the auditor's opinion of the report You will see this in a separate recording But the point is you would have unmodified opinion and emphasis of a matter, but emphasis of a matter sometime It's required and Sometime it is I'm gonna put in quote optional Okay, so I'm gonna in the next slide. I will show you a little bit more about this But simply those are the four conditions that you have to have in order to have unmodified clean opinion Now what other opinions do we have beside unmodified opinion? Before we discuss the other opinions, I would like to share with you an announcement about my company farhat lectures.com Farhat accounting lectures is a supplemental educational tool That's gonna help you with your CPA exam preparation as well as your accounting courses My CPA material is aligned with your CPA review course such as Becker, Roger, Wiley, Gleam, Miles My accounting courses are aligned with your accounting courses broken down by chapter and topics My resources consist of Lectures, multiple choice questions, true-false questions as well as exercises. Go ahead start your free trial today No obligation, no credit card required Opinions other than unmodified or clean again We could have unmodified with an emphasis of a matter explanatory paragraph or non-standard wording Simply put the financial statements are fairly presented nothing wrong with them But the auditor believe it's important or required to provide additional information. So this is this is still unmodified However, you add this paragraph. So I keep this as something other than 100% clean Although this is also clean, but I'm just gonna let you know that you have unmodified with emphasis of a matter You could also have a qualified opinion now. We're going lower than clean. Okay, qualified opinion When do we when do we give a qualified opinion when the overall financial statements are fairly presented? But the scope of the audit has been materially restricted. Remember, we have to collect evidence according to gas What happened here is we collected evidence, but Inserting circumstances we had restriction now We're gonna have a separate recording about qualified opinion But the point I'm trying to make is you could not you could not collect all the evidence You had you had some restriction. Although you had some restriction You you're gonna give a although you had some restriction. You're not gonna give a bad opinion You're gonna give a qualified but there's also you could give also a bad opinion So when you are restricted simply put when you are restricted for gas You can give a qualified and we're gonna see later. You're gonna give a disclaimer, which is bad This is what we're saying here. Or when would you give qualified applicable accounting framework, which is gap for us In the US were not followed in preparing financial statements. Remember, you have to follow gas and gap here What happened is under certain circumstances? You did not follow gap, but it's not a big deal It's not a bad opinion. It's a qualified because if I don't give you a qualified opinion, I can give you something worse I can give you an Adverse, okay, so qualified is you could have qualified under gas. You could have qualified under gap Don't worry. I have a separate recording for each one Adverse is the worst type of opinion the financial the auditor concludes the financial statements are not fairly presented And not fairly presented according to gap because adverse deals with gap Okay, when you have a problem with gap, I can give you a qualified depending on the problem Or I can give you an adverse if I give you an adverse that's bad That's a kiss of that it means the auditor don't agree The financial statements are not fairly presented and the error or the problem is all over the financial statements It's pervasive or you could get a disclaimer disclaimer is a gas issue Remember under gas. I can give you a qualified or I can give you a disclaimer If the problem is all over the place pervasive. It's affecting the whole financial statements I cannot give you a qualified. I can give you a disclaimer simply put What is disclaimer disclaimer saying I am unable to obtain an opinion? Why because I cannot collect enough evidence sufficient appropriate evidence according to gas So it's no longer qualified now now. I'm gonna give you a disclaimer, which is it's really a red flag I'm not being able to collect the evidence now. I cannot collect the evidence It could be for two reasons and we'll talk about that later on it could be that I Cannot collect it. Just I just can't do it for logistical reasons or I'm restricted So it could be by circumstances, which is not as bad or I could be restricted by management And that's a problem. Okay, but the point is you'd say I'm unable to form an opinion I'm going to this claim. That's one reason to this claim. The other reason to this claim is I am not Independent remember independence is the cornerstone of any audit So if you if you find out later that you are not independent What you do is you say look I cannot issue a Opinion because I'm not independent. You don't say anything else You don't say whether you collected evidence or not whether the evidence was sufficient inappropriate You don't mention anything. You just say I have to withdraw. I have to this claim because I am not Independent again for each of these opinion. We're gonna have a separate recording But what should you do now? You should go to Farhad lectures and work MCQs and True-Fals to truly understand these topics if you understand them well You will do well in your accounting course You will do well on your CPA exam invest in yourself invest in your career. Good luck study hard and of course stay safe