Under which of the following circumstances would a disclaimer of opinion on the entity's financial statements not be appropriate?
A)The financial statements fail to contain adequate disclosure of related-party transactions.
B)The entity refuses to permit its attorney to furnish information requested in an attorney letter.
C)The auditors are engaged after the date of the financial statements and are unable to observe physical inventories or apply alternative procedures to verify their balances.
D)The auditors are unable to determine the amounts associated with illegal acts committed by the entity's management.

Question

Quizplus · Accepted Answer

A disclaimer of opinion is not appropriate when the financial statements fail to contain adequate disclosure of related-party transactions because the auditor can issue a qualified opinion or an adverse opinion depending on the materiality and pervasiveness of the lack of disclosure. Disclaimers are typically issued when the auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion, which is more aligned with scenarios B, C, and D.

Under Which of the Following Circumstances Would a Disclaimer of Opinion