# Unqualified Audit: Definition and How It Works in Accounting

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*Audits evaluate the internal controls and financial statements of corporations to ensure they are accurate and free from errors and misstatements. — Investopedia / Jake Shi*

> **Definition**
>
> An unqualified audit is a thorough report that states that a company's internal systems of control and its financial statements are accurate and comply with generally accepted accounting principles.

## What Is an Unqualified Audit?

An unqualified audit is a complete review that certifies a company's financial statements are compliant with [generally accepted accounting principles (GAAP)](https://www.investopedia.com/terms/g/gaap.asp). Also called a clean opinion or an unqualified report, an unqualified audit is given after the auditor completes thorough research of all of the accompanying financial documents. It also analyzes the internal systems of control as well as the details in the organization's books. Unqualified audits give companies credibility, show that they meet regulatory requirements, and help them access capital.

### Key Takeaways

*   An unqualified audit is a thorough audit of a firm's financial statements and ensures they are compliant with GAAP.
*   This type of audit also reviews and certifies the internal controls of a company.
*   Unqualified audits allow companies to remain compliant and help them access capital

## Understanding Unqualified Audits

The alternative to an unqualified audit is an [unaudited opinion](https://www.investopedia.com/terms/u/unqualified-opinion.asp). Unqualified audits are performed with emphasis on details and accuracy and according to accepted accounting principles. If an auditor has reservations as to the accuracy or validity of a firm's financial statements, a qualified opinion may be given instead that outlines the auditor's reservations.

> **Important**
>
> An unqualified report concludes that the financial statements of a company are fair and transparent based on thorough research.

In an unqualified report, auditors will conclude that the [financial statements](https://www.investopedia.com/terms/f/financial-statements.asp) of a business present its affairs fairly in all material aspects. This opinion assumes that a business complied with GAAP and statutory requirements. An opinion of this sort is known as a clean report.

The unqualified report also reflects that any changes in accounting policies have been considered in the financial statements. This opinion does not offer a view on whether a business is in good economic health. The opinion rather states that a business's financial reporting is transparent and thorough and has not hidden important facts.

> **Important**
>
> A qualified report does not comment on whether a business is in good economic health, only that a business's financial reporting is transparent and thorough.

## Unqualified Report vs. Qualified Report

For an unqualified report, the auditor has concluded that most financial matters are dealt with correctly—although there may be some outstanding minor issues. In contrast, an [auditor’s report](https://www.investopedia.com/terms/a/auditorsreport.asp) is qualified for reasons such as limited scope in the auditor’s work or if there are issues concerning the accounting policies. The points of concern must be financially significant for an auditor to qualify a report.

For example, the auditor might consider that an issue misrepresents the actual financial position of the firm. In this case, the auditor might issue a disclaimer or adverse opinion.

However, a qualified audit report does not necessarily mean that a business is in distress or that a firm is failing to disclose important information in the financial statements. A qualified audit report only reflects the auditor’s inability to give a clean report.