Due to the unavailability of audited financial statements for the foreign investee company, the auditor cannot obtain sufficient evidence, leading to a disclaimer of opinion on the client's financial statements. So the answer is option A.
In the given scenario, the auditor faces a limitation in obtaining audited financial statements for the client's investment in a foreign company using the equity method. This lack of access to necessary evidence necessitates a disclaimer of opinion.
The auditor cannot express assurance on the fairness of the financial statements due to the significant uncertainty surrounding the unavailability of crucial information. This emphasizes the importance of transparency and complete documentation in financial reporting.
The disclaimer communicates to users that the auditor cannot form an opinion, highlighting the limitations in the audit process, and prompting stakeholders to exercise caution when relying on the financial statements.
The correct answer is option A.
The complete question is:
Consider the following situations. For each independent situation, select the appropriate type of report that should be issued on the client's financial statements. Assume the auditor is independent unless otherwise noted. Also, assume each situation is material unless otherwise noted.
The client has an investment in a company located in a foreign country. The investment is accounted for using the equity method. The auditor is unable to obtain audited financial statements for the investee company and therefore concludes that sufficient appropriate evidence regarding this investment cannot be obtained.
Select the appropriate type of report
A. Disclaimer
B. Either a qualified or adverse
C. Either a qualified or disclaimer
D. Unmodified