CFA Level I · CFA Level I Exam · Introduction to Financial Statement Analysis
An analyst reads an auditor's report on a company that reports under IFRS. The report states that the statements present fairly in all material respects, except for the effect of inventory that the company valued using a method not permitted by IFRS, and the auditor says the effect is material but not pervasive. The auditor's opinion is most likely:
The opinion is most likely qualified. The inventory valuation departs from IFRS with a material but not pervasive effect, which produces an 'except for' qualified opinion. An adverse opinion would need pervasive misstatement, and an emphasis paragraph does not fix an actual departure from the standards.
- AqualifiedCorrect
- Bunmodified with an emphasis of matter paragraph
- Cadverse
Explanation
A material but not pervasive departure from the framework leads to a qualified opinion, typically worded 'except for'. An adverse opinion requires material and pervasive misstatement. An emphasis paragraph does not apply, because the statements contain an actual departure rather than a matter that is properly disclosed.
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