Adverse opinion

An adverse opinion is a statement made by an entity’s outside auditor, that the entity’s financial statements do not fairly represent its results, financial position, and cash flows.  The opinion may also be issued if certain required disclosures do not accompany the financial statements, or if the entity has not prepared its financial statements in conformity with the provisions of the applicable accounting framework. The auditor states the reason for this type of opinion within the report. This is an unusual outcome, since the auditor is normally able to convince the client to alter its financial statements to achieve a higher degree of reporting fairness. When an adverse opinion is rendered, the client is typically unable to issue the financial statements to outsiders, such as creditors, lenders, and investors.