In about half of the cases of audit reports there are notes with the most frequent the following statement. Without qualifying our opinion, we draw attention to:
Qualified audit reports are usually issued for: scope limitations, violation of GAAP, material misstatements, inadequate disclosure, change in accounting method not justified, etc. There are also "modified" audit reports that warn users of particular issues. Strictly speaking these are unqualified reports, since no misstatements are detected. Modified audit reports are usually issued for: change in accounting method justified, going-concern, divided responsibility report (more than one auditor), and justified departure from GAAP, emphasis on a specific matter. Auditors use this report(s) to draw attention to an important accounting issue or an audit scope/test issue.
A pending tax problem seems like it is a disclosure issue (a contingent liability that is not probable and measurable so no official recording is necessary but disclosure is necessary). If the statement discloses this, the audit report need not be altered. However, if it is material, this could be an emphasis of a matter. In Croatia and Slovenia, the audit reports are classified as unqualified reports, matters of emphasis, with exception, negative opinion, and qualified opinion.
According to Spathis (2003) most of qualifications in financial statements in Croatia and Slovenia enjoy exception as type of qualification which is provided in case when the issues are material in nature but not fundamental disagreement or uncertainty. The motivation of this study is focused on the following determinant factors with regard to Croatia and Slovenia listed companies:
The very low rate of qualified audit reports (0.69%) in the year 2007 which reduced to 0.00% in 2008. It was also 0.00% in 1998,2005 and 2004,
The change of strictly unqualified reports from 58.04% in 2007 to 81.36% in 2008. It was 27.53 in 1998,36.42% in 2005 and 8.4% in 2004)*,
The very high rate of tax contingent liabilities (35.3 1%) in the year 2007 which reduced to 6.45% in 2008. It was 7.62% in 1998, 47.60% in 2005 and 49.86% in 2004,
The increase of the rate of "going-concern opinions" from 2.79% in 2007 to 5.36% in 2008. It was 3.19% in 2005 and no going-concern opinions in 2004,
audit reports with notes about accounting method changes represent 82.63% in 2004, 30.67% in 2005,5.09% in 2007,5.73% in 2008 and 69.92% in 1998,
The lack of disclosure of audit and other non-audit fees by Croatia and Slovenian firms,
The fact that only one out of every two executives of Croatia and Slovenia listed companies has a theoretical knowledge of IFRS which implies that auditing firms have been involved at least in training programs to Croatia and Slovenian listed companies in the transition period to IFRS.
This study is justified in a different context than other studies. It is justified in the framework of IFRS and, in particular, three years after their adoption. IFRS were effective since 2005 and the date of audit opinions ...