Question

Which of the following circumstances will most likely result in an auditor issuing qualified opinion? a. Another auditor performed the audit of one of the client's subsidiaries. b. The auditor was unable to obtain evidence regarding goodwill and intangible assets which represented 90% of the client's net assets. c. The auditor was unable to obtain evidence regarding the client's calculation of the allowance for doubtful accounts, and the balance of accounts receivable, net was material to the financial statements. d. The auditor has significant doubt about the client's ability to continue as a going concern.

Answer 1

The most likely circumstance that would result in an auditor issuing a qualified opinion is when they are unable to obtain evidence regarding the client's calculation of the allowance for doubtful accounts, and the balance of accounts receivable, net was material to the financial statements.

Step-by-step explanation:

The most likely circumstance that would result in an auditor issuing a qualified opinion is option c: The auditor was unable to obtain evidence regarding the client's calculation of the allowance for doubtful accounts, and the balance of accounts receivable, net was material to the financial statements.

A qualified opinion is issued when the auditor has reservations or limitations in regards to specific aspects of the financial statements. In this case, the inability to obtain evidence about the allowance for doubtful accounts could impact the accuracy of the financial statements and therefore result in a qualified opinion.

For example, if the client had overstated the allowance for doubtful accounts, it could artificially inflate the net accounts receivable balance, leading to an inaccurate representation of the company's financial position.