Disclaimer of Opinion – have you ever seen one?

Non-standard audit opinions got their fair share of attention earlier this year in conjunction with the late filing of Valeant Pharmaceuticals. For Valeant, getting anything but a clean, non-qualified opinion could have meant a default on substantial loans.

It has been a while since we have come across a qualified opinion. Yet, on Thursday, we crossed an equally rare animal – a disclaimer of opinion.

According to the regulatory filing of a small, Arizona based company, the limitation of the scope was so severe that the independent audit firm was not able to obtain sufficient evidence to provide a basis for an audit opinion:

“Basis for Disclaimer Opinion;
The Company’s records, support and documentation was not sufficient to provide a basis for an audit opinion. We were unable to satisfy ourselves by other audit procedures concerning the assets, liabilities and equity held at August 31, 2016, as well as the revenues and expenses recognized for the year then ended. As a result of these matters, we were unable to determine whether any adjustments might have been found necessary in respect of recorded or unrecorded assets, liabilities, equity, revenue and expenses.
Because of the significance of the matters described in the Basis for Disclaimer Opinion paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on these financial statements”.

This is a very, very rare occurrence in the post-SOX era (and quite frankly, we hope that this opinion remains an exception).