When an adverse opinion is expressed, the opinion paragraph should include a direct reference to:
A)the paragraph outlining the auditor's responsibility, which discusses the basis for the opinion rendered.
B)a footnote to the financial report that discusses the basis for the opinion.
C)the consistency or lack of consistency in the application of accounting principles.
D)a separate qualification paragraph that discusses the basis for the opinion rendered.

Question

Quizplus · Accepted Answer

An adverse opinion is a type of audit opinion that indicates that the financial statements are materially misstated and do not comply with generally accepted accounting principles (GAAP). When expressing an adverse opinion, the auditor should provide a separate qualification paragraph that discusses the nature and scope of the material misstatements identified during the audit, and the impact of these misstatements on the financial statements. Therefore, choice D is the best answer as it suggests that a separate qualification paragraph should be included to discuss the basis for the adverse opinion rendered. Choices A and B are incorrect because they do not specifically address the adverse opinion or the material misstatements identified. Choice C is incorrect because it only discusses the consistency of application of accounting principles, which may not be the primary reason for rendering an adverse opinion.

When an Adverse Opinion Is Expressed, the Opinion Paragraph Should