Final answer:
The Unqualified opinion indicates that financial statements are prepared by U.S. GAAP, representing the most positive outcome of an audit. So the correct answer is option 1.
Step-by-step explanation:
The type of audit opinion that indicates that the financial statements are prepared by U.S. GAAP (Generally Accepted Accounting Principles) is the Unqualified opinion. An Unqualified opinion, often referred to as a "clean opinion," suggests that the auditor believes the financial statements are free of material misstatements and are in conformity with GAAP.
This is the most desirable type of audit opinion an entity can receive. Other types of audit opinions include a Qualified opinion, which suggests that except for certain issues, the financial statements are following GAAP, an Adverse opinion, which indicates that the financial statements are not following GAAP, and a Disclaimer of opinion, which is given when the auditor is unable to form an opinion on the financial statements.
An unqualified opinion is issued when the auditor determines that the financial statements give a true and fair view of the entity's financial position, results of operations, and cash flows following U.S. GAAP.