Final answer:
When an auditor issues a 'qualified opinion', it indicates an exception to the standard opinion which is not seriously invalidating the financial statements as a whole. The correct answer is 1).
Step-by-step explanation:
When an auditor has an exception to the standard opinion but it is not of sufficient seriousness to invalidate the financial statements as a whole, the type of opinion issued is known as a qualified opinion. This means that, except for certain areas of the financial statements where the auditor may have found discrepancies or issues.
The financial statements present a true and fair view of the company's financial position. As opposed to a qualified opinion, an adverse opinion is given when the financial statements do not fairly present the financial position, results of operations, or cash flows in accordance with generally accepted accounting principles (GAAP).
A disclaimer of opinion is issued when the auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion, while an unmodified opinion reflects that the financial statements are free from material misstatement.