Your client has experienced a major data breach with lawsuits and fines pending of significant and uncertain amounts. These events are disclosed in the client's financial statements and are clearly explained in the notes. How do these events affect the independent auditor's report?
A) The auditor would use a standard unqualified auditor's report.
B) The auditor would use an emphasis of matter paragraph titled "Data Breach" to highlight the events.
C) The auditor would use an "other matters" paragraph titled "Data Breach" to highlight the amounts.
D) The auditor would use a qualified audit opinion due to the size of the uncertainty.

Question

Quizplus · Accepted Answer

The auditor would use an emphasis of matter paragraph titled "Data Breach" to highlight the events. This is because the data breach is a significant event that may affect users of the financial statements, and such a paragraph will draw attention to the event and explain its effects on the financial statements. This does not necessarily mean that the audit opinion will be qualified, as the financial statements may still fairly present the financial position and performance of the company, despite the data breach.

Your Client Has Experienced a Major Data Breach with Lawsuits