SOC 2 Qualified Opinion

A SOC 2 qualified opinion is an important term related to the audit process for  SOC (Service Organization Controls) 2 reports. It signifies that the auditor has identified one or more issues during the examination of a service organization’s controls that impact the trust service criteria for security, availability, processing integrity, confidentiality, or privacy. These issues prevent the auditor from giving a clean (unqualified) opinion, indicating that not all controls were operating effectively.

Implications of a Qualified Opinion

• Identified Deficiencies: The auditor has found one or more deficiencies in the controls. These deficiencies might relate to security, availability, processing integrity, confidentiality, or privacy.
• Impact on Business: A qualified opinion can impact the trust clients have in the service organization, potentially affecting business relationships and potentially  causing clients to look for alternative service providers.
• Need for Remediation: The service organization will need to address the identified issues to improve their controls and achieve an unqualified opinion in future audits.

• Regulatory and Contractual Compliance: Depending on regulatory requirements and contractual obligations, a qualified opinion might require the service organization to take corrective actions to avoid penalties or to meet the expectations of their clients.
• Operational Improvements: A qualified opinion provides a clear indication of areas needing improvement. It can be a  starting point for the service organization to enhance its controls and processes, thereby strengthening its overall compliance posture.

Steps to Address a Qualified Opinion

• Review the Report: Understand the specific deficiencies or exceptions noted by the auditor.
•  Create a Remediation Plan:  Develop a plan to address the issues. This might involve updating policies, improving processes, or implementing new controls.
• Implement Changes: Put the remediation plan into action and ensure all necessary changes are made effectively.
• Monitor and Test: Continuously monitor the new controls and test them to ensure they are working as intended.
• Prepare for Re-audit: After addressing the issues, prepare for a follow-up audit to verify that the deficiencies have been corrected.

SOC 2 Report Qualified Opinion

A SOC 2 qualified opinion is an auditor’s conclusion that, while the service organization’s overall system meets most of the criteria for effective controls, there are significant exceptions. These exceptions are substantial enough to prevent the auditor from issuing a clean (unqualified) opinion but not so severe as to warrant an adverse opinion or a disclaimer of opinion.

A SOC 2 report with a qualified opinion indicates that while many controls are functioning correctly, there are significant areas of concern that need to be addressed. By taking prompt and effective action to remediate these issues, a service organization can improve its control environment, regain client trust, and achieve a clean audit opinion in future SOC 2 reports.

Qualified vs Unqualified Opinion 

When assessing the results of a SOC 2 audit, it’s important to understand the differences between a qualified and an unqualified opinion. The table below outlines five key differences between these two types of audit opinions across various parameters.

Characteristic	Qualified Opinion	Unqualified Opinion
Definition	Identifies specific exceptions or deficiencies in controls.	Indicates that controls are effective with no exceptions.
Scope of issue	Issues are material but not pervasive.	No material issues; controls meet all criteria.
Impact on trust	Might reduce clients trust due to identified deficiencies.	Enhances clients’ trust with a clean report.
Need for remediation	Requires remediation for specific issues.	No remediation needed, controls are satisfactory
Compliance confidence	Lower confidence in overall compliance effectiveness.	High confidence in compliance effectiveness.

Qualification in Audit Report

In an audit report, a qualification refers to the auditor’s conclusion that there are certain limitations or exceptions that prevent them from issuing an unqualified opinion. A qualified opinion is given when the auditor believes that the financial statements or controls generally present a fair view but with some exceptions that are material but not pervasive. This means that while the overall picture is accurate, there are specific areas where the auditor has concerns.

A qualified opinion in an audit report signifies that the auditor has found certain issues that need attention. While the overall financial statements or controls are mostly accurate, there are specific areas where improvements are required. 

Four Types of Audit Opinions

Unqualified Opinion

An unqualified opinion is a clean report, indicating that the service organization’s controls are effectively designed and operating as intended without any significant issues. This opinion reassures stakeholders that the organization’s operations are reliable and compliant with relevant standards.

Qualified Opinion

A qualified opinion indicates that there were issues or deficiencies in the organization’s controls that could affect the service commitments and system requirements. While some controls were effective, there were notable exceptions. These  issues are significant but do not undermine the overall reliability of the controls.

Adverse Opinion

An adverse opinion is a severe form of a qualified opinion where the auditor finds that the controls are not effective overall. This opinion suggests significant and pervasive deficiencies, indicating that the organization’s controls are unreliable and fail to meet the necessary standards.

Disclaimer of Opinion

A disclaimer of opinion occurs when the auditor is unable to obtain sufficient evidence to form an opinion. This may be due to significant limitations in scope or uncertainties, preventing the auditor from assessing the reliability of the organization’s controls. This leaves stakeholders without a clear understanding of the organization’s compliance status.