Question

In the case of a disclaimer due to lack of independence, what happens to the entire scope paragraph in the report?

1) The entire scope paragraph is excluded from the report
2) The entire scope paragraph is included in the report

Answer 1

In the case of a disclaimer due to lack of independence, 1) the entire scope paragraph is excluded from the report.

Step-by-step explanation:

In the case of a disclaimer due to lack of independence, the entire scope paragraph is excluded from the report.

When a disclaimer is made due to lack of independence, it means that the auditor is unable to provide an opinion on the financial statements due to a conflict of interest or other reasons. In such cases, the auditor cannot rely on the work they have performed, including the procedures performed in the scope of the audit.

As a result, the entire scope paragraph, which outlines the extent of the audit procedures performed, is excluded from the report. This is to ensure transparency and accuracy in the reporting of the auditor's opinion.