Final answer:
The auditor must choose between issuing a qualified report or a disclaimer of opinion when they cannot obtain evidence supporting an entity's investment in a subsidiary. An adverse opinion is reserved for materially misstated financial statements, while a disclaimer is issued when sufficient audit evidence is not available.
Step-by-step explanation:
If an auditor is unable to obtain audited financial statements or evidence supporting an entity's investment in a subsidiary, the auditor must choose between issuing a qualified report or a disclaimer of opinion. The auditor would not issue an unqualified/unmodified opinion because sufficient appropriate audit evidence has not been obtained, and it is not appropriate to issue an adverse opinion since this is specifically reserved for situations where the financial statements are materially misstated.
An adverse opinion is given when the financial statements are materially misstated and do not present the financial position fairly, while a disclaimer is issued when the auditor is unable to obtain sufficient appropriate audit evidence, and consequently, cannot form an opinion on the financial statements.
A qualified opinion is issued when the auditor concludes that misstatements are material but not pervasive to the financial statements.