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:

Unmodified Opinion

Qualified Opinion

Adverse Opinion

Disclaimer of Opinion

How to approach this question

GAAP Departure. Material? Yes. Pervasive? No. Result = Qualified.

Full Answer

B.Qualified Opinion✓ Correct

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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