Question

An auditor rendered an opinion on a company’s financial statements, stating that the statements were fair in all material respects taken as a whole except for the treatment of a lease in a manner that materially violated generally accepted accounting principles for lease accounting. The most likely type of opinion the auditor rendered on the financial statements was:

a) An unmodified opinion.

b) A qualified opinion.

c) An adverse opinion.

d) A disclaimer of opinion.

Answer 1

The most likely type of opinion rendered by an auditor who notes a material misstatement in the financial statements, such as an improper treatment of a lease, is a qualified opinion.

Step-by-step explanation:

When an auditor states that financial statements are fair in all material respects except for the treatment of a specific item, such as a lease, which is in violation of generally accepted accounting principles (GAAP), the most likely type of opinion rendered is a qualified opinion. A qualified opinion is given when the financial statements are presented fairly in all material aspects except for a specific issue that the auditor notes does not comply with GAAP. Therefore, the correct answer is b) A qualified opinion.

In contrast, an unmodified opinion would imply that the financial statements are presented fairly in accordance with GAAP without any exceptions. An adverse opinion would indicate that the financial statements are not presented fairly in accordance with GAAP, and a disclaimer of opinion would be given if the auditor does not have enough information to form an opinion on the financial statements.