An auditor is performing an integrated audit of an issuer. The auditor identifies a material weakness in internal control over financial reporting. The client remediates the weakness 20 days before year-end. The auditor tests the remediated control and finds it effective. What is the appropriate opinion on internal control?

Answer options:

Unqualified Opinion.

Adverse Opinion.

Qualified Opinion.

Disclaimer of Opinion.

How to approach this question

Remediation requires TIME. If fixed too late to test sufficiently, the MW stands at year-end -> Adverse.

Full Answer

B.Adverse Opinion.✓ Correct

Adverse Opinion.

To issue an unqualified opinion, the control must be operating effectively as of the balance sheet date. If a MW is remediated shortly before year-end, the auditor typically does not have enough evidence of its operating effectiveness over a sufficient period. Therefore, the MW is considered to still exist for reporting purposes.

Common mistakes

Thinking 'it's fixed so it's fine'.

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