Question

When an auditor issues an adverse opinion, which of the following should be included in the opinion paragraph?

a. The financial statement effects of the departure from GAAP.
b. A statement that indicates that the financial statements are fairly stated except for a reason that is described in the separate paragraph.
c. A reference to a separate paragraph that describes the reason for the adverse opinion.
d. The reasons that the financial statements are misleading.

Answer 1

The auditor's opinion paragraph in an adverse opinion should include a reference to a separate paragraph describing the reason for the adverse opinion and the financial statement effects of the departure from GAAP.

Step-by-step explanation:

When an auditor issues an adverse opinion, the opinion paragraph should include a reference to a separate paragraph that describes the reason for the adverse opinion.

This separate paragraph explains the auditor's reasons for disagreeing with the financial statements and provides more information about why the opinion is adverse.

The financial statement effects of the departure from GAAP should also be included in the separate paragraph, as well as a statement that indicates that the financial statements are fairly stated except for the reason described in the separate paragraph.