ExpertHard1 markMultiple Choice
CPA · Question 40 · Area IV: Forming Conclusions and Reporting
An auditor is auditing the financial statements of an issuer. The auditor discovers that the client has not disclosed a significant related party transaction in the footnotes. The transaction is material. Management refuses to correct the omission. Which of the following opinions should the auditor issue?
An auditor is auditing the financial statements of an issuer. The auditor discovers that the client has not disclosed a significant related party transaction in the footnotes. The transaction is material. Management refuses to correct the omission. Which of the following opinions should the auditor issue?
Answer options:
A.
Unqualified opinion with an explanatory paragraph.
B.
Disclaimer of opinion.
C.
Qualified or Adverse opinion.
D.
Qualified opinion due to a scope limitation.
How to approach this question
Missing Disclosure = GAAP Departure. GAAP Departure = Qualified or Adverse.
Full Answer
C.Qualified or Adverse opinion.✓ Correct
C
Failure to disclose information required by GAAP is a departure from the applicable financial reporting framework. Depending on the materiality and pervasiveness of the omission, the auditor should express a qualified or adverse opinion.
Common mistakes
Thinking missing info is a Scope Limitation. Scope Limitation is when you CAN'T find the info. Here, you found it, but they won't print it.
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