Question

During the audit of Chesterfield Fine Wines, the auditors determine that certain necessary accounting records were destroyed in a recent fire at Chesterfield's headquarters. The auditors find this to be a material, but not pervasive, scope limitation. Which type of audit opinion should be issued?

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

Answer 1

A material, but not pervasive, scope limitation due to destroyed accounting records leads to a qualified opinion, as it prevents an unmodified opinion but is not significant enough to warrant a disclaimer or an adverse opinion.

Step-by-step explanation:

If the auditors of Chesterfield Fine Wines determine that there is a material, but not pervasive, scope limitation due to the destruction of certain necessary accounting records, the appropriate audit opinion to issue would typically be a qualified opinion. This type of opinion is used when the financial statements present fairly in all material respects, except for a material misstatement that does not misrepresent the financial position pervasively. An unmodified opinion would indicate no material misstatements or scope limitations, a disclaimer of opinion is issued when the limitation is so significant that the auditor cannot form an opinion on the financial statements, and an adverse opinion is issued when the financial statements do not present fairly due to a pervasive misstatement.