When management is unable to provide an explanation for a previously unrecognized risk identified through the analytical procedures, the auditor must issue an adverse opinion.

Question

Quizplus · Accepted Answer

The statement is false. If management is unable to provide an explanation for a previously unrecognized risk identified through analytical procedures, the auditor should perform further audit procedures to obtain sufficient appropriate audit evidence to evaluate the risk and its impact on the financial statements. The issuance of an adverse opinion should only occur if the auditor concludes that the financial statements are materially misstated due to the identified risk and management refuses to provide adequate disclosure or correction.

When Management Is Unable to Provide an Explanation for a Previously