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CFA Level I · CFA Level I Exam · Introduction to Financial Statement Analysis

A company's auditor issues an unqualified opinion on its financial statements. An analyst relying on this opinion should most likely conclude that:

An unqualified opinion provides reasonable assurance that the statements are free of material misstatement and fairly presented under the applicable framework. It does not guarantee the absence of bias in estimates or assure future earnings, so analysts must still assess accounting choices and judgments.

  1. Athe statements are free from any management bias in estimates
  2. Bthe company's future earnings are assured
  3. Cthe statements provide reasonable assurance of being free of material misstatementCorrect

Explanation

An unqualified opinion gives reasonable, not absolute, assurance that statements are free of material misstatement and fairly presented. It does not guarantee absence of bias in estimates or predict future earnings, so analysts still need to scrutinize judgments.

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