Question

An example of a scenario which would cause the auditors to modify the opinion on internal control would be _______.

A) Hiring of a new Chief Operating Officer
B) There is a restriction on the scope of the auditor's work
C) There is a restriction on the scope of the prior auditor's work
D) Certain analytical procedures conducted yield expected results.

Answer 1

Auditors may modify their opinion on internal control if they find significant control deficiencies, material misstatements, or evidence of fraud during their audit that suggest the internal controls are not effective.

Step-by-step explanation:

An example of a scenario which would cause the auditors to modify the opinion on internal control would be if there were control deficiencies identified during the audit that are significant enough to deem the internal controls over financial reporting as not effective.

Auditors perform tests to assess the effectiveness of internal controls. Should they encounter issues such as material misstatements in the financial statements that were not prevented or detected on a timely basis, or evidence of fraud or noncompliance with laws and regulations that could have a material effect on the financial statements, they might conclude that the internal control has deficiencies. In such cases, the auditors would not give an unqualified opinion but rather an adverse opinion or a disclaimer of opinion, depending on the circumstances.