The simple reason for a modified audit report is that the company wants a clean opinion, and the auditor has a defined error threshold. If an audit got to the point where errors identified went over the threshold, the company would just need to open back up the books to record/correct some of the items in order to get the total misstatement within the tolerable error for the audit firm. If the errors resulted from control issues, then you could still see discussion about the control environment or material weakness within the opinion on internal controls. A modified audit opinion can arise where there is an error, a disagreement over a particular matter or a lack of sufficient audit evidence in a particular area of the financial statements, including disclosures. A common reason for auditors issuing a qualified opinion is that the company didn't present its records with GAAP. A relevant business scenario in which a company has received a modified audit report was when KPMG LLP gave Silicon Valley Bank a clean bill of health just 14 days before the lender collapsed, the Big Four audit firm flagged potential losses on loans as a so-called critical audit matter. Silicon Valley Banks unrealized losses in its bond portfolio appear to meet every definition of a possible critical audit matter. The latest banking crisis has exposed the gamble some banks took in betting heavily on long-term government bonds, which last year plunged in value as the Federal Reserve raised interest rates