Question

In which of the following circumstances would an auditor usually choose between issuing a qualified opinion or a disclaimer of opinion on a client's financial statements?

A. When the auditor identifies a significant but isolated limitation in the scope of the audit that affects a specific account balance.
B. When the client's financial statements contain pervasive misstatements that cannot be appropriately corrected or estimated.
C. When the auditor discovers minor errors in the financial statements that are immaterial to the overall presentation.
D. When the client's management refuses to provide the auditor with necessary information for completing the audit.

Answer 1

An auditor would choose between issuing a qualified opinion or a disclaimer of opinion on a client's financial statements in specific circumstances such as limitations in the scope of the audit, pervasive misstatements, or refusal of necessary information by management.

Step-by-step explanation:

An auditor would usually choose between issuing a qualified opinion or a disclaimer of opinion on a client's financial statements in the following circumstances:

1. When the auditor identifies a significant but isolated limitation in the scope of the audit that affects a specific account balance. For example, if the auditor is unable to obtain sufficient evidence for a specific account, they may issue a qualified opinion.
2. When the client's financial statements contain pervasive misstatements that cannot be appropriately corrected or estimated. Pervasive misstatements are those that are so material and widespread that they affect the overall presentation of the financial statements. In such cases, the auditor may choose to issue a disclaimer of opinion.
3. When the client's management refuses to provide the auditor with necessary information for completing the audit. If the auditor is unable to obtain sufficient appropriate audit evidence due to management's refusal, they may need to issue a disclaimer of opinion.