Final answer:
A qualified report is issued when there are exceptions to GAAP in financial statements, but the overall financial position is presented fairly except for these issues. Qualified reports come from an auditor's objective analysis with a comprehensive understanding of facts and GAAP principles.
Step-by-step explanation:
A qualified report is issued by an auditor when they have encountered one or more exceptions to the generally accepted accounting principles (GAAP) in the financial statements of an entity, but those exceptions are not so significant as to necessitate a completely adverse opinion or a disclaimer of opinion. Unlike an unqualified report, which states that financial statements present a fair and accurate view of a company's financial position according to GAAP without any reservations, a qualified report suggests that, except for certain issues identified by the auditor, the financial statements are accurate.
The assessment that leads to a qualified report involves distinguishing fact from opinion and ensuring that the analytical report is based on verifiable facts. A qualified report indicates that the auditor has a comprehensive understanding of the matters at hand and is conscious of the audience and context. The language used by the auditor will aim to be objective and trustworthy, often accompanied by correct citations for any referenced material.