Financial Education

Securities regulations require the company’s auditors to provide a report stating whether investors can rely on the information presented. Such reports can take several forms:

• Unqualified opinion
• Qualified opinion
• Adverse opinion
• Disclaimer of opinion
• Going concern clause

In most cases, the auditor will provide an unqualified opinion, essentially saying “yes, investors can rely on the information in this report.” An example can be found in the 20F (the annual report for a foreign company) for Sony. The key line is:

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Sony Corporation and its subsidiaries (“the Company”) at March 31, 2004 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

These statements assure investors that they can rely on the financial statements presented.

For more information, see all articles on: Financial Statement Analysis, Fundamental Analysis, Securities Regulation

See also:

Analyzing the Auditor’s Statement: Adverse Opinion

Analyzing the Auditor’s Statement: The Going Concern Clause

Analyzing the Auditor’s Statement: A Qualified Opinion

Analyzing the Auditor’s Statement: Disclaimer of Opinion

Benefits of a Formal Investment Policy Statement