Your client, Sharpe Ltd, is being sued by one of its competitors for $40 million for an alleged patent infringement.Your client has assets of $80 million and a reported profit of $20 million.The client has disclosed the lawsuit in a note to the accounts along with a statement indicating that they intend to vigorously defend the suit and are confident of winning the suit.Your independent legal advice supports this view and you are satisfied with the details provided by the client in the notes to the accounts.What type of opinion should you express on the financial report of Sharpe Ltd?
A)An unmodified opinion with an Emphasis of Matter.
B)A disclaimer of opinion.
C)An unmodified opinion.
D)A qualified opinion or adverse opinion.

Question

Quizplus · Accepted Answer

The lawsuit is disclosed in the notes to the accounts and the client has indicated that they intend to vigorously defend the suit and are confident of winning the suit. The independent legal advice supports this view and the auditor is satisfied with the details provided by the client in the notes to the accounts. Therefore, the auditor can express an unmodified opinion with an Emphasis of Matter.

Your Client, Sharpe Ltd, Is Being Sued by One of Its