Question

The auditors know that the client's accounting for deferred income taxes is not in accordance with generally accepted accounting principles, but because of a very significant scope limitation they have not been able to determine the amount of the misstatement involved and have not been able to form an opinion on the financial statement taken as a whole. What type of report should they issue?

a) Disclaimer of opinion
b) Adverse opinion
c) Qualified opinion
d) Unmodified opinion with an explanatory paragraph

Answer 1

The auditors should issue a Disclaimer of opinion in this case option a.

Step-by-step explanation:

The auditors should issue a Disclaimer of opinion in this case. A Disclaimer of opinion is issued when the auditors are unable to form an opinion due to a significant scope limitation or lack of sufficient evidence. In this situation, the auditors are unable to determine the misstatement involved in the client's accounting for deferred income taxes, so they cannot form an opinion on the financial statements as a whole.