When an adverse opinion is issued regarding internal control over financial reporting (ICFR), the auditor _______.
A)maintains that the company has fairly reported its financial statements in accordance with Generally Accepted Accounting Principles (GAAP)
B)makes a clear statement that the company has not maintained effective internal control for the period under audit
C)makes a clear statement that the company has maintained effective internal control for the period under audit
D)is not entitled to receive full compensation for services rendered during the audit

Question

Quizplus · Accepted Answer

When an adverse opinion is issued regarding internal control over financial reporting (ICFR), the auditor makes a clear statement that the company has not maintained effective internal control for the period under audit. This means that there are material weaknesses in the company's internal control that could result in a material misstatement of the financial statements. The auditor does not maintain that the company has fairly reported its financial statements in accordance with Generally Accepted Accounting Principles (GAAP) and is not required to make a statement on the overall fairness of the financial statements. The auditor's compensation is not directly related to the issuance of an adverse opinion on ICFR.

When an Adverse Opinion Is Issued Regarding Internal Control Over