Skip to content

IAI Actuarial Core Principles · Business Finance · Regulation of financial reporting of incorporated entities

An auditor concludes that the financial statements are materially misstated in one area, but the misstatement is confined to that area and does not affect the rest of the accounts. Which audit opinion is most appropriate?

A qualified 'except for' opinion is appropriate because the misstatement is material but not pervasive. An adverse opinion would require pervasive misstatement, and a disclaimer applies when the auditor cannot obtain sufficient evidence. An unmodified opinion would be inappropriate given the material error.

  1. AUnmodified opinion
  2. BDisclaimer of opinion
  3. CQualified opinion (except for)Correct
  4. DAdverse opinion
  5. Emphasis of matter only, with no modification

Explanation

A material but not pervasive misstatement leads to a qualified 'except for' opinion. An adverse opinion is for pervasive misstatement, a disclaimer for inability to obtain evidence, and an unmodified opinion is wrong because the misstatement is material.

Did you get it right without looking?

One question tells you little. A timed set on Regulation of financial reporting of incorporated entities shows your real accuracy, how long you take and where you lose marks.

Practise Regulation of financial reporting of incorporated entitiesFree diagnostic mock

More Regulation of financial reporting of incorporated entities questions