s published financial statement. Auditors may be required to add a cautionary note when an outside auditing company questions the going-concern assumption. As a going concern, assets are valued differently than they would be if the company under review had filed for bankruptcy protection or any other crisis. Examples of situations that could cause an auditor to issue a going concern warning would include:
The debtor's default on one or more loan payments
A violation of one or more loan covenants
When a substantial doubt exists about the company under audit's ability to remain in business, auditors must add the going concern caution to published audited financial statements. There are four different types of auditor's opinion letters. They are:
An "unqualified opinion" letter involves a certification made by the independent auditing firm attesting to the fact that the company's financial statements were prepared in conformity with Generally Accepted Accounting Principles, and fairly represented the firm's financial condition. Robert Rouse writes in CPA Journal that in an unqualified opinion the auditor must be able to support the client's assertions as to the existence, completeness, rights and obligations, valuation and disclosure of the audited accounts (Rouse 74).
A "qualified" auditor's opinion letter is one in which the auditor has included one or more specific qualifications to its assurance that the published financial statements follow established accounting practices. This means that one or more irregularities were found and that the customer could not or would not correct them before the completion of the audit. Elsie C. Ameen explains in Review of Financial Economics that a qualified audit opinion contains information if it alters investors' beliefs about the value of the firm (Ameen 41).
Due to scope limitations imposed by a client, a CPA may be unwilling to express any opinion about the accuracy of a c...