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Finance: What is Adverse Audit Opinion? 27 Views


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Description:

What is Adverse Audit Opinion? An adverse audit opinion signals that an auditor has found flaws in a company’s financial statements. Adverse audit opinions are bad for companies because it means they have done something to skew their financials, and this obviously creates concern for investors.

Language:
English Language

Transcript

00:00

Finance a la shmoop. What is an adverse audit opinion and you know deficiency

00:07

letter. Okay people this is not good you thought you had good grades but when [Report card is thrown onto the desk]

00:14

you got your report card your teachers had opinions adverse to yours... [Report card has bad grades in it]

00:19

They sent your parents a deficiency letter you know the one with all those [Mom looks shocked]

00:23

D's on it well when it's a company's audit that has similarly gone awry it's [Boss looks angry and employee looks shocked]

00:29

the nice way to say it well then it means they didn't count the beans

00:33

properly when they gave their financial reports to their investors or whoever

00:37

the auditors were serving usually this implies that companies overstated how [Employee counting coffee beans]

00:41

profitable they really were or how well they were really doing so tens of

00:44

thousands of investors if you know the company was public when this all [Big line of people waiting to invest]

00:48

happened paid twenty seven dollars and 32 cents a share when with the real

00:52

numbers the stock probably should have been trading more at like you know

00:55

fourteen dollars and 27 cents a share big difference well basically an auditor

00:59

is saying that yours are not bread-and-butter misstatements no oops [Bean report with the numbers crossed out]

01:04

it's more of a dude there were material ie important

01:09

mistakes and they were pervasive like everywhere math, science, english, history

01:14

your failure it's no mystery that's how auditors talk really

01:18

all right well then there are massive losses to massive numbers of people who hire [Protesters on a street]

01:21

massive numbers of lawyers who sue you.. massively.. in the world of finance an

01:25

adverse audit opinion is a bit like running over everyone's favorite dog [Car goes over a bump]

01:30

several times only you're the one who is likely dead meat [Guy reverses and runs the dog over again and the owner comes to fight]

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