If a material misstatement exists and the client does not adjust, the opinion should be which of the following?

If a material misstatement exists and the client does not adjust, the opinion should be which of the following?

• A. Qualified opinion
• B. Unmodified opinion
• C. Disclaimer of opinion
• D. Adverse opinion

Answer: (A)

When a material misstatement exists and management does not correct it, the auditor should issue a qualified opinion. This happens because the statements are not fair for the matter identified, but the rest of the financial statements are considered fairly presented. The report is issued “except for” the effects of the misstatement, indicating that the issue is material but not pervasive to the overall FS. If the misstatement were pervasive to the financial statements, the auditor would consider an adverse opinion. If the auditor lacked sufficient evidence to form an opinion or encountered a scope limitation that is material and pervasive, a disclaimer would be appropriate. If there were no material misstatements, an unmodified (clean) opinion would be issued.

When a material misstatement exists and management does not correct it, the auditor should issue a qualified opinion. This happens because the statements are not fair for the matter identified, but the rest of the financial statements are considered fairly presented. The report is issued “except for” the effects of the misstatement, indicating that the issue is material but not pervasive to the overall FS.

If the misstatement were pervasive to the financial statements, the auditor would consider an adverse opinion. If the auditor lacked sufficient evidence to form an opinion or encountered a scope limitation that is material and pervasive, a disclaimer would be appropriate. If there were no material misstatements, an unmodified (clean) opinion would be issued.