A qualified audit report is a report issued by an auditor that reports certain discrepancies in the financial statements prepared by the entity. These discrepancies are typically termed as qualifications. Such a report, therefore, issues a qualified opinion on the true and fair view of the financial position as reported in the financial statements. The qualified audit report is one of the three modified audit reports where the opinion is issued to the financial statements that are not prepared in all material respect while those misstatements are not pervasive. Therefore, as per the definition of qualified audit report option no. 3 is correct. Additional Information Types of the audit report. There are four types of audit reports:1. Unqualified audit reportAn unqualified audit report is the report auditors express their opinion that there is no material misstatement on financial statements. In this case, the financial statements are prepared in accordance with the applicable accounting standards. 2. Qualified audit reportThe qualified audit report is the report that auditors give a qualified opinion on financial statements. In this case, financial statements contain material misstatements that can be isolated to one part of financial statements. In other words, the misstatement is material but not pervasive. It does not affect the financial statements as a whole. 3. Adverse audit reportAn adverse audit report is a report that auditors issue saying that there is a material misstatement and it affects financial statements as a whole. In this case, the misstatement is both material and pervasive. 4. Disclaimer of opinion audit reportDisclaimer of the opinion audit report is the audit report that auditors cannot express their opinion on financial statements. This is usually due to auditors could not obtain sufficient appropriate audit evidence to form an opinion on financial statements.