Question

During the audit of Chesterfield Fine Wines, the auditors determine that the company has miscalculated the depreciation for some recently purchased major distillery equipment. The auditors find this to be a material, but not pervasive, departure from GAAP. Which type of audit opinion should be issued?

1) adverse
2) qualified
3) unmodified
4) disclaimer

Answer 1

A material but not pervasive misstatement in Chesterfield Fine Wines' financial statements would typically result in a qualified opinion from auditors, indicating that except for the specific issue identified, the financial statements are in line with GAAP. Hence, option 2) is the correct answer.

Step-by-step explanation:

When the auditors of Chesterfield Fine Wines determine that there is a material misstatement that is not pervasive relating to GAAP, regarding the depreciation of major distillery equipment, they would likely issue a qualified opinion. This type of opinion indicates that, except for the effects of the material misstatement identified, the financial statements present fairly the financial position and performance of the company in accordance with GAAP. It is used when the deviation from GAAP is not sufficiently serious to necessitate an adverse opinion or a disclaimer of opinion.