CFA Level I · CFA Level I Exam · Introduction to Financial Statement Analysis
Which statement about an auditor's unmodified opinion on a company's financial statements is most accurate?
An unmodified opinion provides reasonable assurance that the financial statements are free of material misstatement. It is not a guarantee against fraud and not a statement on earnings quality, because audits give reasonable rather than absolute assurance and compliant statements can still reflect aggressive choices.
- AIt guarantees that no fraud occurred during the period.
- BIt provides reasonable assurance that the statements are free of material misstatement.Correct
- CIt certifies that the company's reported earnings are of high quality.
Explanation
Audits provide reasonable, not absolute, assurance, and the opinion addresses material misstatement, whether from fraud or error. It does not guarantee the absence of fraud, and it is not a judgment on earnings quality, since compliant accounting can still involve aggressive choices.
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