ExpertEasy1 markMultiple Choice
CPA · Question 30 · Area IV: Reporting
An auditor is auditing the financial statements of a nonissuer. The auditor identifies a material misstatement in the inventory balance. Management refuses to correct the misstatement. The auditor concludes the misstatement is material but NOT pervasive. Which opinion should be issued?
An auditor is auditing the financial statements of a nonissuer. The auditor identifies a material misstatement in the inventory balance. Management refuses to correct the misstatement. The auditor concludes the misstatement is material but NOT pervasive. Which opinion should be issued?
Answer options:
A.
Unmodified Opinion with Emphasis of Matter.
B.
Qualified Opinion.
C.
Adverse Opinion.
D.
Disclaimer of Opinion.
How to approach this question
Matrix: Issue = Misstatement. Level = Material but Not Pervasive -> Qualified. (If Pervasive -> Adverse).
Full Answer
B.Qualified Opinion.✓ Correct
Qualified Opinion.
A qualified opinion is appropriate when the auditor concludes that misstatements are material but not pervasive to the financial statements.
Common mistakes
Confusing Adverse (Pervasive) with Qualified (Not Pervasive).
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