What is a qualified audited financial statement?

• A. Audited statements that contain departures from GAAP or omitted disclosures may require auditor to qualify the report.
• B. Audited statements always comply perfectly with GAAP.
• C. Compiled statements can be qualified.
• D. Review statements include qualification.

Answer: (A)

A qualified audited financial statement means the auditor found the financial statements are fairly presented in all material respects, except for one or more specific issues. The key idea is that there is a departure from GAAP or an omitted disclosure that prevents the auditor from giving a completely clean (unqualified) opinion, but the rest of the statements are still considered reliable. The auditor typically states that, except for the matter described, the financial statements are presented in accordance with GAAP. This is different from a fully GAAP-compliant, unqualified opinion, and it’s also distinct from compiled or reviewed statements, which do not carry the same level of assurance as an audit.