Disclaimer of opinion

Disclaimer of Opinion

An auditor’s statement that they are unable to form an opinion on the fair presentation of financial statements due to significant scope limitations, material uncertainties, or lack of independence, representing a refusal to provide assurance rather than negative assurance.

For instance, if auditors are appointed after year-end and cannot observe inventory counting, access key records, or gather sufficient evidence about significant account balances due to timing constraints, they might issue a disclaimer stating: “We do not express an opinion on the financial statements because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraph.”

A disclaimer differs from other opinion types by providing no assurance on the financial statements. The audit report explicitly details the reasons preventing opinion formation, such as scope limitations imposed by management, circumstances preventing evidence gathering, or multiple material uncertainties about going concern or litigation. Disclaimers typically raise serious concerns for stakeholders, potentially triggering loan covenant violations, regulatory inquiries, and financing difficulties. They’re relatively rare because management typically resolves significant limitations or uncertainties before report issuance, or auditors resign from engagements with unresolvable scope limitations.