Question

In which one of the following instances would an auditor not issue a disclaimer of opinion?

a. The auditors are not invited to the periodic inventory at year end.
b. There are significant misstatements in the financial statements.
c. There is a significant limitation on the scope of the engagement.
d. There is insufficient evidence for the auditor to form an opinion on the fairness of the financial statements.

Answer 1

An auditor would not issue a disclaimer of opinion for significant misstatements in the financial statements; they would issue an adverse or qualified opinion instead.

Step-by-step explanation:

In the context of auditing, an auditor would not issue a disclaimer of opinion if there are significant misstatements in the financial statements. Instead of a disclaimer, the auditor would likely issue an adverse opinion or a qualified opinion, depending on whether the misstatements are pervasive or limited to specific areas. Option 'a' could lead to a scope limitation and potential disclaimer if the inventory is a significant portion of the financial statements. Option 'c' suggests a significant limitation on scope, quite likely resulting in a disclaimer. Option 'd', insufficient evidence, would also typically result in a disclaimer. Thus, the auditor would not issue a disclaimer in the scenario indicated by option 'b' when there are significant misstatements. Instead, an adverse or qualified opinion would be appropriate.