If the firm auditing a company realizes that it is not independent with respect to the client,it will issue a disclaimer of opinion based on the inherent GAAP violation imposed by the audit firm.

Question

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A disclaimer of opinion is issued when the auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion, but not specifically due to a GAAP violation by the audit firm. Independence issues may lead to a withdrawal from the engagement rather than a disclaimer based on GAAP violations.

If the Firm Auditing a Company Realizes That It Is