Question

Eagle Company, a public company, had a computer failure and lost part of the financial data. As a result, the auditor was unable to obtain sufficient audit evidence relating to Eagle's inventory account. Assuming the inventory account is at least material, the auditor would most likely choose which option?

1) Issue a qualified opinion on Eagle's financial statements
2) Issue an adverse opinion on Eagle's financial statements
3) Issue an unqualified opinion on Eagle's financial statements
4) Issue a disclaimer of opinion on Eagle's financial statements

Answer 1

If the auditor is unable to obtain sufficient audit evidence relating to Eagle's inventory account, the most likely option would be to issue a disclaimer of opinion on Eagle's financial statements.

Step-by-step explanation:

If the auditor is unable to obtain sufficient audit evidence relating to Eagle's inventory account, and assuming that the inventory account is at least material, the auditor would most likely choose to issue a disclaimer of opinion on Eagle's financial statements.

A disclaimer of opinion is issued when the auditor is unable to form an opinion on the financial statements due to the lack of sufficient evidence. It indicates that the auditor is unable to provide assurance regarding the accuracy and completeness of the financial statements.

This option is chosen when the auditor believes that the limitations on the audit scope significantly affect the overall financial statements. In this case, since a computer failure resulted in the loss of data, it would be difficult for the auditor to accurately assess the inventory account, which could have a material impact on the financial statements. Thus, issuing a disclaimer of opinion would be the most appropriate choice.