In: Accounting
Nature of Matter
Giving Rise to the Potential Modification |
Auditor’s Professional Judgment About the Pervasiveness of the Effects or Possible Effects on the Financial Statements | ||
Material but Not Pervasive | Material and Pervasive | Not Material or Pervasive | |
Financial statements are misstated | (1.) | (2.) | (3.) |
Inability to obtain sufficient appropriate audit evidence | (4.) | (5.) | (6.) |
Pick one and they can be used more than once
Unmodified
Qaulified
adverse
Disclaimer
Solution:
(1) and (4) Qualified Opinion = The auditor shall express an qualified opinion when:
(a) The auditor, having obtained sufficient appropriate audit evidence, concludes that misstatements, individually or in the aggregate, are material, but not pervasive, to the financial statements; or
(b) The auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion, but the auditor concludes that the possible effects on the financial statements of undetected misstatements, if any, could be material but not pervasive.
(2) Adverse opinion = The auditor shall express an adverse opinion when the auditor, having obtained sufficient appropriate audit evidence, concludes that misstatements, individually or in the aggregate, are both material and pervasive to the financial statements.
(3) & (6) Unmodified Opinion = The auditor shall express an unmodified opinion when:
The financial statements are prepared in all material respects in accordance with the applicable financial reporting framework. Material respect here means that there are no material misstatements in the financial statements, however there could be immaterial mistatements which does not affect the decisions of users of financial statements.
(5) . Disclaimer of opinion = The auditor shall disclaim an opinion when the auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion, and the auditor concludes that the possible effects on the financial statements of undetected misstatements, if any, could be both material and pervasive