Question

If the financial statements contain an immaterial departure from generally accepted accounting principles, the auditors issue a qualified opinion; if the financial statements contain a material departure from GAAP, the auditors issue an adverse opinion.

a) Qualified opinion
b) Adverse opinion
c) Unmodified opinion
d) Disclaimer of opinion

Answer 1

An 'unmodified opinion' indicates financial statements are presented fairly, a 'qualified opinion' is issued for immaterial departures from GAAP, and an 'adverse opinion' is for material departures.

Step-by-step explanation:

The term 'unmodified opinion' is associated with auditors issuing a clean report indicating that the financial statements present a true and fair view in accordance with the accounting standards. When there is an immaterial departure from generally accepted accounting principles (GAAP), the auditors may issue a qualified opinion, suggesting that except for the immaterial departures, the financial statements are accurate. If there is a material departure from GAAP, auditors issue an adverse opinion, indicating that the financial statements are not a fair representation of the entity's financial position. Lastly, a disclaimer of opinion is issued when auditors do not have sufficient basis to issue an opinion on the financial statements.