Question

When an auditor expresses an adverse opinion, the opinion paragraph should include:

Select one:
A.
a description of the uncertainty or scope limitation that prevents an unmodified opinion.
B.
the principal effects of the departure from generally accepted accounting principles.
C.
a direct reference to a separate paragraph in the auditor's report disclosing the basis for the opinion.
D.
the substantive reasons for the financial statements being misleading.

Answer 1

WhenWhen an auditor expresses an adverse opinion, the opinion paragraph should include a direct reference to a separate paragraph in the auditor's report disclosing the basis for the opinion. Thus, option C is the correct answer.The auditor's report is issued after an audit. It explains the auditor's professional opinion about whether the company's financial statements are free from any material misstatement. A standard format is used by most auditors for their reports, which includes an introductory paragraph, a scope paragraph, an opinion paragraph, and explanatory paragraphs.The auditor will have to provide an adverse opinion when it is impossible to express an unqualified opinion on the financial statements. An adverse opinion is given when the auditor is not satisfied with the financial statements and concludes that there are material misstatements. An opinion paragraph containing the basis for the opinion should be included in the report. This paragraph should make a direct reference to another paragraph that gives a detailed explanation of the basis for the opinion.