A client has capitalizable leases but refuses to capitalize them in the financial statements. Which of the following reporting options does an auditor have if the misstatements have a material and pervasive effect on the financial statements?
A)Qualified opinion.
B)Unqualified opinion.
C)Disclaimer of opinion.
D)Adverse opinion.

Question

Quizplus · Accepted Answer

If the misstatements have a material and pervasive effect on the financial statements, the auditor's only option would be to issue an adverse opinion. This is because the financial statements do not comply with generally accepted accounting principles (GAAP) and the misstatements are so significant that they affect the overall fairness of the financial statements.

A Client Has Capitalizable Leases but Refuses to Capitalize Them