If the auditor decides to draw attention to large related party transactions occurring in the financial statements of the client, which report will most likely be issued?
A) Qualified.
B) Unqualified with an explanatory paragraph
C) Adverse.
D) Consolidation.

Question

Quizplus · Accepted Answer

An unqualified report with an explanatory paragraph would be issued if the auditor decides to draw attention to large related party transactions occurring in the financial statements of the client, but it does not affect the overall fairness of the financial statements. The explanatory paragraph provides additional information for the users of the financial statements to understand the nature and significance of the related party transactions. A qualified report is issued when there is a limitation on the scope of the audit or when there is a material misstatement in the financial statements. An adverse report is issued when the financial statements are materially misstated and do not present the financial position, results of operations, or cash flows fairly. A consolidation report is not relevant to this situation as it pertains to the combined financial statements of two or more companies.

If the Auditor Decides to Draw Attention to Large Related