Question

According to the AICPA principles, which of the following is incorrect?

a. If the auditor has reservations about the fairness of financial statement presentation, the reason(s) must be stated in the auditor's report.
b. If there is a material departure from GAAP in the financial statements, the auditor should explicitly state the nature of the departure and the dollar effects where determinable.
c. Auditors should state the reasons why an unqualified opinion cannot be issued.
d. Auditors should issue an unqualified opinion in all cases where companies have provided an entire set of financial statements and footnotes that include all years presented for comparative purposes.

Answer 1

Statement d is incorrect because an auditor should only issue an unqualified opinion when the auditor concludes that the financial statements are presented fairly in all material respects according to the applicable reporting framework, rather than just because a full set of financial statements and notes are provided.

Step-by-step explanation:

The question relates to the principles set forth by the American Institute of Certified Public Accountants (AICPA) regarding the responsibilities of an auditor when issuing reports on financial statements. According to the AICPA principles, statement d is incorrect because auditors should not issue an unqualified opinion in all cases simply because a company has provided a complete set of financial statements and notes. Instead, an unqualified opinion is issued when the auditor concludes that the financial statements are presented fairly in all material respects in conformity with the applicable financial reporting framework.

An auditor must evaluate whether the financial statements adhere to Generally Accepted Accounting Principles (GAAP) and any material departures from GAAP would need to be explicitly stated, along with the nature of the departure and the dollar effects if determinable, as indicated by statement b. If an unqualified opinion cannot be issued, as per statement c, the auditor should state the reasons why. If the auditor has reservations about the fairness in the presentation of the financial statements, these reasons must be stated in the auditor's report, in line with statement a.