Final answer:
An auditor must express a disclaimer of opinion, instead of attaching an explanatory note, when they haven't performed enough audit procedures to form an opinion on the financial statements, due to limitations or other significant scope impediments.
Step-by-step explanation:
An auditor’s reporting responsibilities are not met by attaching an explanation of the circumstances and a disclaimer of opinion to the client's financial statement when the auditor has not performed sufficient auditing procedures to form an opinion. In such a case, the auditor’s inability to obtain appropriate audit evidence could significantly impair the auditor's capacity to report on the financial statements. This situation may arise from various factors, such as limitations imposed by the client, or circumstances that prevent the auditor from completing an aspect of the audit. When an auditor encounters issues that prevent satisfactory completion of the audit, and this leads to the auditor concluding that the possible effects on the financial statements of undetected misstatements, if any, could be both material and pervasive, the auditor should express a disclaimer of opinion rather than simply attach an explanatory note.
In accordance with professional auditing standards, a disclaimer of opinion indicates that the auditor cannot express an opinion on the financial statements' overall fairness. The auditor's report in such cases should communicate the reasons why the auditor could not obtain sufficient appropriate audit evidence, and why the auditor's conclusion is that a disclaimer of opinion is necessary, rather than merely attaching an additional explanation.