Final answer:
An auditor may add an explanatory paragraph to an unqualified opinion in cases like going concern issues, significant subsequent events, changes in accounting principles, or when financial statements are audited after a period without audits.
Step-by-step explanation:
An auditor gives an unqualified opinion when the financial statements present fairly, in all material respects, the financial position of the company. However, there are certain situations where an auditor may add an explanatory paragraph to this unqualified opinion. One such situation is when there is a going concern issue, meaning that there is substantial doubt about the company's ability to continue as a going concern within the next year. Another situation may occur when there is a significant subsequent event that does not alter the auditor’s opinion on the historical financial statements but requires additional disclosure for users to fully understand the financial implications.
An explanatory paragraph may also be added if the company has changed its accounting principles, but the auditor concludes that the change is properly accounted for and adequately disclosed in the financial statements. Additionally, when the financial statements are audited after a period of time when they were not, an explanatory paragraph may be included to highlight the lack of audited information for the previous period.