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Adverse opinion a report issued when the auditor believes the financial statements are so materially misstated or misleading as a whole that they do not present fairly the entitiy's financial position or the results of its operations and cash flows in coformity with GAAP Disclaimer of opinion a report issued when the auditor is not able to become satisfied that the overall financial statements are fairly presented or the auditor is not independent material misstatement a misstatement in the financial statements, knowledge of which would affect a decision of a reasonable user of the statements. qualified opinion a report issued when the auditor believes that the overall financial statements are fairly stated but that either the scope of the audit was limited or the financial data indicated a failure to follow GAAP Standard unqualified audit report the report a CPA issues when all auditing conditions have been met, no significant misstatemetns have been discovered and left uncorrected, and it is the auditor's opinion that the financial statemtns are fairly stated in accordance with GAAP Independence in appearance the auditor's ability to maintain an unbiased viewpoint in the eyes of others Independence of mind the auditor's state of mind that enables an unbiased viewpoint in the performance of professional services; also described as "independence in fact" Audit failure a situation in which the auditor issues an incorrect audit opinion as the result of an underlying failure to comply with the requirements of auditing standards Audit risk the risk that the auditor will conclude after conducting an adequate audit that the financial statements are fairly stated and an unqualified opinion can therefore be issued when, in fact, they are materially misstated.