What is Opinion Shopping?

Opinion shopping is the practice of searching for an auditor that will issue an unqualified opinion on a company’s financial statements. An unqualified opinion indicates that the firm’s financial statements are fairly presented, and that they conform to the applicable accounting framework. Opinion shopping is most common when a company has a strained relationship with its existing auditor, because the company is engaging in accounting practices with which the auditor disagrees.

Advantages of Opinion Shopping

By engaging in opinion shopping, a business has a better chance of convincing creditors, lenders, and investors to give a firm funding, since these parties rely on the auditor’s opinion when making funding decisions. Furthermore, a business might be able to secure a lower interest rate on its debt from a lender, so there is a direct monetary reward resulting from opinion shopping.

Disadvantages of Opinion Shopping

A business that engages in opinion shopping probably has questionable financial processes and so is at a higher risk of being accused of fraud. Given these issues, many auditors will refuse to deal with a management team that is known to engage in opinion shopping. It will also look strange to the company’s investors if the firm is constantly shifting through a series of auditors - which might lead them to suspect that the firm is having a hard time getting a clean opinion on its financial statements. As a result, investors may sell their stakes in the business, or refuse to give it additional funds.