Types of Reports

Question 1

A qualified opinion is expressed because of

Answer 1

1. An inability to obtain sufficient appropriate evidence that could result in material but not pervasive undetected misstatements or
2. Misstatements that are material but not pervasive.

Examples of misstatements include the following:

• Inappropriate selection of accounting principles
• Inappropriate application of accounting principles
• Unjustified change in accounting principles
• Inadequate disclosure
• Failure to provide a basic financial statement, e.g., statement of cash flows

Question 2

The auditor should express an adverse opinion when,

Answer 2

having obtained sufficient appropriate audit evidence, (s)he concludes that misstatements, individually or combined, are material and pervasive to the financial statements.

Question 3

The auditor disclaims an opinion due to

Answer 3

an inability to obtain sufficient appropriate audit evidence when the auditor concludes that the possible effects on the financial statements of undetected misstatements, if any, could be material and pervasive.