Final answer:
1) An adverse opinion is given when the financial statements materially misstate the entity's financial position and does not use the phrase 'except for,' which pertains to a qualified opinion.
Step-by-step explanation:
When analyzing the various types of opinions that an auditor can issue, it is important to understand the specific circumstances that dictate each type of opinion. Here is the clarification for the provided statements:
- An adverse opinion is issued when the auditor determines that the financial statements are materially misstated and do not represent the entity's financial position, results of operations, or cash flows fairly in accordance with the applicable financial reporting framework. The use of 'except for' is not appropriate for an adverse opinion, but rather for a qualified opinion, indicating that the financial statements are fairly presented 'except for' the effects of some particular matter.
- An adverse opinion is not limited to a lack of knowledge by the auditor but can be due to significant discrepancies in the financial statements that do not comply with the financial reporting framework.
- A disclaimer of opinion is issued when the auditor is unable to obtain sufficient appropriate audit evidence to form an opinion on the financial statements and concludes that the possible effects of undetected misstatements, if any, could be both material and pervasive. This is not related to the materiality of the misstatements but rather to the scope of the potential misstatements and the auditor's inability to obtain the necessary information.
- A qualified opinion is issued when the auditor concludes that, except for the effects of some material misstatement(s) or a limited scope of work, the overall financial statements are fairly stated. It suggests that the exceptions are not pervasive to the financial statements as a whole.