Question

AAA & Associates recently finished auditing LinktheEarth Corporation's internal control over financial reporting. AAA found a number of material weaknesses in the entity's internal control. LinktheEarth's management remediated all of the weaknesses that AAA found. However, the auditors did not have sufficient time to retest the controls. What report should AAA issue with regards to internal control over financial reporting at year-end?

A) Unqualified report.

B) Adverse report.

C) Qualified report.

D) Disclaimer on opinion.

Answer 1

Since AAA & Associates did not retest the controls after the remediation of material weaknesses in LinktheEarth Corporation's internal control, they should issue a disclaimer of opinion on the internal control over financial reporting at year-end.

Step-by-step explanation:

When AAA & Associates completed the audit of LinktheEarth Corporation's internal control over financial reporting and found material weaknesses, even though management remediated these weaknesses, the auditors did not retest the controls. In this situation, AAA & Associates should issue a disclaimer of opinion because they have not had sufficient time to perform the necessary retesting to verify the effectiveness of the remediation. A disclaimer of opinion is appropriate when the auditors cannot obtain enough appropriate audit evidence on which to base the opinion, which includes situations where controls have been changed but not retested.