Final answer:
The correct option is 4). When a client fails to make adequate disclosure in the financial statements, the auditor must issue either a qualified or an adverse opinion and clearly communicate this in the audit report.
Step-by-step explanation:
When a client fails to make adequate disclosure in the financial statements or related footnotes, it is the responsibility of the auditor to inform the reader about the inadequacy of the disclosure. Depending on the severity and implications of the inadequate disclosure, the auditor may issue a qualified opinion or an adverse opinion. A qualified opinion indicates that, except for the effects of the matter to which the qualification relates, the financial statements present a true and fair view. An adverse opinion is given when the auditor concludes that the financial statements do not present a true and fair view due to a pervasive misstatement or omission.
If only certain disclosures are not adequately made, and if these are not pervasive to the financial statements, the auditor may decide to issue a qualified opinion. However, if the lack of disclosure is so material and pervasive that the financial statements do not present a fair view, the auditor should issue an adverse opinion. In both cases, the audit report must clearly communicate the nature and the implications of the inadequate disclosures.
Option 4 which states, 'present the information in the audit report and to issue a qualified or an adverse opinion' is the correct answer to the student's question.