Disclaimer of Opinion

Question 1

What is the effect of a disclaimer of opinion on the auditor’s report?

Answer 1

1. )Minor change to introductory paragraph; no effect on management’s responsibility section.
2. )Modify the auditor’s responsibility section to consist of two sentences, including reference to the Basis for Disclaimer of Opinion paragraph.
3. )Add a Basis for Disclaimer of Opinion paragraph before the opinion paragraph.
4. )Express a disclaimer of opinion.

Question 2

What is the fundamental reason for a disclaimer of opinion?

Answer 2

The auditor is unable to obtain sufficient appropriate audit evidence, and the auditor concludes that the possible effect on the financial statements could be material and pervasive.

Question 3

What conclusion is expressed by a disclaimer of opinion?

Answer 3

No conclusion (no assurance) is expressed, since sufficient appropriate audit evidence has not been obtained.

Question 4

What is meant by the term “pervasive” in connection with audit reporting issues?

Answer 4

1. )Effects that are not confined to specific elements, accounts or items of the financial statements
2. )Effects that, if so confined, represent or could represent a substantial proportion of the financial statements
3. )Regarding disclosures, those that are fundamental to users’ understanding of the financial statements

Question 5

Give an example of the language used for a disclaimer of opinion.

Answer 5

“Because of the significance of the matter described in the Basis for Disclaimer of Opinion paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on these financial statements.”

Question 6

What effects would identified material misstatements have on the auditor’s disclaimer of opinion?

Answer 6

The auditor should modify the report, while still expressing a disclaimer of opinion, to identify the effects of any identified material misstatements.