An auditor is auditing the financial statements of a nonissuer. The auditor decides to issue a qualified opinion due to a material misstatement. Which of the following is the correct placement of the paragraph describing the matter?

Answer options:

In an emphasis-of-matter paragraph following the opinion paragraph.

In a 'Basis for Qualified Opinion' paragraph following the opinion paragraph.

In the notes to the financial statements only.

How to approach this question

Correction: Under SAS 134 (current AICPA standards), the Opinion comes FIRST. The Basis for Opinion comes SECOND. This aligns with PCAOB. So the Basis follows the Opinion.

Full Answer

B.In a 'Basis for Qualified Opinion' paragraph following the opinion paragraph.✓ Correct

Under current standards (SAS 134 for nonissuers), the Auditor's Report begins with the Opinion section, followed immediately by the Basis for Opinion section. The description of the matter giving rise to the qualification is included in the 'Basis for Qualified Opinion' section.

Common mistakes

Relying on old standards where the Opinion was at the end.

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