When Victor M. Earle III picked up his Wall Street Journal yesterday morning and read the headline of a story about his firm, he said he "went into absolute limbo."

Earle is general counsel for Peat, Marwick, Mitchell & Co. in New York City, the country biggest accounting firm. The Journal story reported the details of a report on PMM's auditing practices that had been part of the settlement of a Securities and Exchange Commission suit.

But what troubled Earle was the headline and lead of the story, stating that the special committee had given PMM a "qualified opinion."

"The Journal blew it," sputted Earle. "Their story is crazy."

Actually, all that the Journal did was to take some literary license with two little words - qualified opinion" - that have a very definite meaning in the lexicon of the ledger.

When an auditor, such a PMM, Arthur Young or Price Waterhouse, has some reservations about a company's accounts, it will give the company only a "qualified opinion" instead of certifying the company's books.

It is a little fetting a general discharge rather than an honorable discharge from the military. It means that everyhing is not quite right.

Naturally, Earle and other PMM officials are concerned about what their clients will think when they read that their accountant got only a "qualified opinion."

The special committee never used the phrase "qualified opinion," of course. Indeed, the 31-page report, which was based on 14,000 hours of poring over PMM's books, is carefully couched in broad generalities.

Among the areas reviewed were PMM's hiring practices, training and continuing education, staffing of offices, and quality control. The committee seemed happy with most of what PMM was doing, but there were a few cautiously worded critisms.

For example, the report - writers 3 accountants and an attorneys - "recommended" that the firm continue to emphasize the importance of documentation . . ."

The report also noted in its conclusion that some accountants were not complying with the firm's own rules and regulations.

"Although in certain areas, the level of compliance was not, in our compliance with prescribed policies, procedures and practices was generally satisfactory."

The report was ordered in 1975 by the SEC as a result of five major cases of auditing deficiencies by PMM. The PMM clients involved were Penn Central Co., Tally Industries, Inc., Republic National Life Insurance Co., National Student Marketing Corp., and Stirling Homex Corp.

Earle, the PMM general counsel, has handled the complicated negotiations with the SEC arising from these cases. He generally is credited with keeping to a minimum the adverse publicity growing out of the cases.

For example, when the SEC brought its suit against PMM in 1975, Earle is credited with arranging for their voluminous documents to be released to the press late on July 2, on the eve of the Fourth of July weekend.

PMM was so upset by the phrase "qualified opinion" that it apparently forgot an agreement made last week with the SEC in which both sides agreed not to comment on the special committee report.

Yesterday, after a reporter refused an offer from Earle to interview PMM senior partner Walter Hanson on the subjects of the report, Earle called back with a statement from Hanson.

Hanson said: "The committee's report is most certainly not a qualified opinion; to the contrary, it expresses satisfaction with PMM's policies and procedures together with suggestions for improvement which are typically found in an auditor's management lettter to its client. Indeed, we are pleased with the report."