Restrictions imposed by an entity prohibited the auditors' observation of physical inventories,which accounted for 35% of total assets.Alternative auditing procedures were not feasible,although the auditors were able to examine satisfactory evidence for all other items in the financial statements.The auditors would most likely express
A) A qualified opinion on the entity's financial statements, referring to a departure from generally accepted accounting principles.
B) A disclaimer of opinion on the entity's financial statements.
C) An unqualified opinion on the entity's financial statements with a separate explanatory paragraph.
D) An unqualified opinion on the entity's financial statements with a modification of the scope paragraph.

Question

Quizplus · Accepted Answer

The restriction on the observation of physical inventories prevents the auditors from obtaining sufficient appropriate audit evidence, which is a limitation on the scope of their work. As a result, they cannot issue an unqualified or qualified opinion on the financial statements. The only option in this circumstance is to issue a disclaimer of opinion, which states that the auditors could not express an opinion on the financial statements because they were unable to obtain sufficient audit evidence.

Restrictions Imposed by an Entity Prohibited the Auditors' Observation of Physical