Question

In which one of the following instances would an auditor most likely issue an adverse opinion?

a. Management declines to present earnings per share in the income statement.
b. There is substantial doubt about the entity's ability to continue as a going concern.
c. There is a material dollar misstatement that overshadows the overall financial statements.
d. The client does not allow the auditor to send confirmations to its three largest customers.

Answer 1

An auditor would most likely issue an adverse opinion in the instance where there is a material dollar misstatement that overshadows the overall financial statements.

Step-by-step explanation:

An auditor would most likely issue an adverse opinion in instance c, where there is a material dollar misstatement that overshadows the overall financial statements. This means that the misstatement is significant enough to affect the overall understanding of the financial statements and cannot be reasonably corrected or adjusted. In instances a, b, and d, an auditor would not issue an adverse opinion. The omission of earnings per share in the income statement (a) or the inability to continue as a going concern (b) may result in other types of audit opinions. The client's refusal to send confirmations (d) may impact the auditor's assessment of risk or require alternative procedures, but an adverse opinion is not typically issued in this case.