A modified unqualified audit report arises when the auditor believes the financials are fairly stated but also believes additional information should be provided.

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This statement is true. A modified unqualified audit report can be issued when the auditor believes the financial statements are fairly stated but also believes that there is additional information that should be disclosed in order to better inform the users of the financial statements. Examples of such disclosures could include information regarding uncertainties, contingencies, or related party transactions.

A Modified Unqualified Audit Report Arises When the Auditor Believes