Question

Match each situation with the appropriate type of opinion to be issued.

1. a material misstatement is considered pervasive
2. auditors have doubt about a company's ability to continue as a going concern
3. auditors have obtained sufficiently appropriate evidence to conclude that the financial statements are not materially misstated
4. auditors determine that the possible effects on the financial statements of the inability to obtain sufficient evidence (i.e. a scope limitation) could be both material and pervasive
5. the client has elected to not follow gaap

a. Adverse Opinion
b. Unmodified Opinion
c. Adverse Opinion
d. Unqualified Opinion with an Emphasis-of-Matter Paragraph
e. Disclaimer of Opinion

Answer 1

Matching each situation to the appropriate type of auditor's opinion involves understanding the severity and implications of the misstatements or scope limitations, as well as the company's adherence to GAAP and going concern status. The correct answer is 3. auditors have obtained sufficiently appropriate evidence to conclude that the financial statements are not materially misstated.

Step-by-step explanation:

The situations described relate to the types of opinions that auditors may issue about a company's financial statements and adherence to generally accepted accounting principles (GAAP). When matching each situation with the appropriate type of opinion to be issued:

1. A material misstatement that is considered pervasive would result in an Adverse Opinion (c).
2. If auditors have doubt about a company's ability to continue as a going concern, they would issue an Unqualified Opinion with an Emphasis-of-Matter Paragraph (d).
3. When auditors have obtained sufficiently appropriate evidence to conclude that the financial statements are not materially misstated, they would issue a Unmodified Opinion (b).
4. In the case of a scope limitation that could be both material and pervasive, a Disclaimer of Opinion (e) would be issued.
5. Lastly, if the client has elected not to follow GAAP, this would also result in an Adverse Opinion (a).