What is a Disclaimer of Opinion?

A disclaimer of opinion is a statement made by an auditor that no opinion is being given regarding the financial statements of a client. If the client allows the auditor to complete planned work, or rectifies an underlying irregularity, then the auditor may be able to issue a clean opinion. Until the auditor issues a replacement opinion, the disclaimer remains in force.

Example of a Disclaimer of Opinion

The following is a sample disclaimer of opinion that an external auditor might issue:

INDEPENDENT AUDITOR’S REPORT

To the Board of Directors and Shareholders of XYZ Corporation

Disclaimer of Opinion

We were engaged to audit the financial statements of XYZ Corporation, which comprise the balance sheet as of December 31, 2024, and the related statements of income, changes in equity, and cash flows for the year then ended, as well as the accompanying notes to the financial statements.

Basis for Disclaimer of Opinion

During the course of our audit, we were unable to obtain sufficient and appropriate audit evidence regarding the company’s inventory balance, which represents a material portion of total assets. The company’s management did not allow us to perform necessary audit procedures, including physical inventory verification and review of supporting documentation. As a result, we were unable to determine whether any adjustments were necessary to the reported financial position and results of operations.

Additionally, significant discrepancies were identified in the company’s accounting records, and management was unable to provide adequate explanations or documentation to support certain transactions. Due to these limitations, we were unable to assess whether the financial statements present a true and fair view in accordance with generally accepted accounting principles (GAAP).

Conclusion

Because of the significance of the matters described above, we were unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the accompanying financial statements.

Report on Other Legal and Regulatory Requirements

Due to the scope limitations and the lack of verifiable financial records, we are unable to provide assurance regarding the company’s compliance with applicable regulatory and statutory requirements.

[Auditor’s Firm Name]
Certified Public Accountants
[City, State]
[Date]

Reasons for a Disclaimer of Opinion

A disclaimer of opinion may be given for several reasons, which are as follows:

Blocked procedures. The auditor may not have been allowed or been able to complete all planned audit procedures.
Restricted scope. The client restricted the scope of the examination to such an extent that the auditor was unable to form an opinion.