ExpertMedium1 markMultiple Choice
CPA · Question 59 · Area 4: Reporting
An auditor discovers that the client has not capitalized a material lease that meets the criteria for a finance lease. The client refuses to correct the error. The effect is material but not pervasive. What opinion should be issued?
An auditor discovers that the client has not capitalized a material lease that meets the criteria for a finance lease. The client refuses to correct the error. The effect is material but not pervasive. What opinion should be issued?
Answer options:
A.
Unmodified Opinion
B.
Qualified Opinion
C.
Adverse Opinion
D.
Disclaimer of Opinion
How to approach this question
GAAP Departure. Material? Yes. Pervasive? No. Result = Qualified.
Full Answer
B.Qualified Opinion✓ Correct
Qualified Opinion
When the financial statements are materially misstated due to a departure from GAAP, but the effect is not pervasive (isolated to specific accounts), a qualified opinion is appropriate.
Common mistakes
Choosing Adverse (too severe) or Unmodified (too lenient).
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