An auditor is auditing the financial statements of a nonissuer. The auditor has substantial doubt about the entity's ability to continue as a going concern, but the doubt is NOT alleviated by management's plans. The financial statements adequately disclose the uncertainty. What is the appropriate audit opinion?

Answer options:

Qualified Opinion.

Adverse Opinion.

Unmodified Opinion with an Emphasis-of-Matter paragraph.

Disclaimer of Opinion.

How to approach this question

Going Concern Matrix: Doubt Remains + Disclosure OK = Unmodified + EOM. Doubt Remains + Disclosure Bad = Qualified/Adverse.

Full Answer

C.Unmodified Opinion with an Emphasis-of-Matter paragraph.✓ Correct

Unmodified Opinion with an Emphasis-of-Matter paragraph.

When substantial doubt exists and is properly disclosed, the auditor issues an unmodified opinion but adds an emphasis-of-matter paragraph using the terms 'substantial doubt' and 'going concern'.

Common mistakes

Thinking going concern always equals Qualified opinion.

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