During the year under audit, Forrest Corporation experienced significant losses due to a pervasive fraud scheme. Because of the lack of documentary evidence and inability to perform appropriate auditing procedures, the auditors were unable to determine the total amount of the loss. What type of report should the auditors issue?
A)Qualified or adverse opinion.
B)Disclaimer or adverse opinion.
C)Disclaimer of opinion or qualified opinion.
D)Unqualified opinion with an explanatory paragraph.

Question

Quizplus · Accepted Answer

When auditors cannot obtain sufficient appropriate audit evidence about a significant matter, they may issue a disclaimer of opinion if the limitation on the scope is pervasive, or a qualified opinion if the matter is material but not pervasive. In this case, the inability to determine the total amount of loss due to fraud and lack of evidence leads to a limitation on the scope of the audit, which could warrant either a disclaimer of opinion (if the issue is pervasive) or a qualified opinion (if the issue is material but not pervasive).

During the Year Under Audit, Forrest Corporation Experienced Significant Losses