There are the following situations of modifying the auditor‟s report wording:
I. Matters that Do Not Affect the Auditor’s Opinion
i. Emphasis of matter: In certain circumstances, an auditor‟s report may be modified adding an emphasis of matter paragraph to highlight a matter affecting the financial statements which is included in a note to the financial statements that more extensively discusses the matter. The addition of such an emphasis of matter paragraph does not affect the auditor‟s opinion. The paragraph would preferably be included after the paragraph containing the auditor‟s opinion but before the section on any other reporting responsibilities, if any. The emphasis of matter paragraph would ordinarily refer to the fact that the auditor‟s opinion is not qualified in this respect.
II. Matters that Do Affect the Auditor’s Opinion
i. Qualified opinion: A qualified opinion should be expressed when the auditor concludes that an unqualified opinion cannot be expressed but that the effect of any disagreement with management, or limitation on scope is not so material and pervasive as to require an adverse opinion or a disclaimer of opinion. A qualified opinion should be expressed as being „except for‟ the effects of the matter to which the qualification relates.
ii. Disclaimer of opinion: A disclaimer of opinion should be expressed when the possible effect of a limitation on scope is so material and pervasive that the auditor has not been able to obtain sufficient appropriate audit evidence and accordingly is unable to express an opinion on the financial statements.
iii. Adverse opinion: An adverse opinion should be expressed when the effect of a disagreement is so material and pervasive to the financial statements that the auditor concludes that a qualification of the report is not adequate to disclose the misleading or incomplete nature of the financial statements.