Final answer:
An auditor should issue an adverse opinion on the company's ICFR when a material weakness is found, as it suggests a reasonable possibility of a material misstatement in the financial statements that might not be prevented or detected. A qualified opinion on ICFR might be appropriate if the weakness is limited in scope.
Step-by-step explanation:
When an auditor finds a material weakness in a company's internal controls, their response should be guided by the severity of the weakness and its effect on the financial statements. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the company's financial statements will not be prevented, or detected and corrected, on a timely basis.
If the auditor concludes that, due to the material weakness, there is a reasonable possibility of a material misstatement in the financial statements, they typically will not issue a qualified or adverse opinion on the financial statements themselves unless the material misstatements are actually identified. Instead, the auditor should issue an adverse opinion on the company's internal control over financial reporting (ICFR). A qualified opinion on ICFR may be issued if the scope of the weakness is limited and does not pertain to all financial reporting.