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

An auditor concludes that the financial statements contain a material misstatement that is also pervasive. Which audit opinion is the auditor most likely to issue?

An adverse opinion is issued when misstatements are both material and pervasive, meaning the financial statements do not give a true and fair view. A qualified opinion is for material but non-pervasive issues, and a disclaimer is for inability to obtain sufficient evidence.

  1. AAn unmodified opinion with an emphasis of matter paragraph
  2. BAn unmodified opinion
  3. CA qualified opinion stating 'except for'
  4. DAn adverse opinion stating the statements do not give a true and fair viewCorrect
  5. A disclaimer of opinion because evidence could not be obtained

Explanation

A material and pervasive misstatement leads to an adverse opinion. A qualified 'except for' opinion applies when the misstatement is material but not pervasive. A disclaimer applies when the auditor cannot obtain sufficient evidence, which is a different situation from a known misstatement.

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