Final answer:
True, as misstatements in financial statements become more pervasive, an auditor is more likely to issue a disclaimer of opinion as opposed to a qualified opinion. This occurs when pervasive misstatements leave the auditor unable to form or express an opinion on the financial statements.
Step-by-step explanation:
The statement that as misstatements become more pervasive, the likelihood of issuing a disclaimer rather than a qualified opinion increases is True. In the context of auditing and financial reporting, a misstatement refers to an error or inaccuracy in the financial statements that can be due to fraud or error. Auditors are responsible for assessing whether the financial statements are free of material misstatement and provide an opinion based on that assessment.
When misstatements are identified and they are so pervasive that the auditor cannot obtain sufficient appropriate audit evidence on which to base the audit opinion, or when the possible aggregate effect of undetected misstatements is both material and pervasive, then the auditor may decide to issue a disclaimer of opinion. A disclaimer of opinion indicates that the auditor does not express an opinion on the financial statements, typically due to the client not providing sufficient evidence or due to severe scope limitations.
A qualified opinion, on the other hand, is issued when the auditor concludes that misstatements are material but not pervasive. This type of opinion signals that except for the effects of the matter to which the qualification relates, the financial statements give a true and fair view in accordance with the applicable financial reporting framework.