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Finance: What is Adverse Audit Opinion? 27 Views
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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.
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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]
Full Transcript
- 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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