In which of the following circumstances would auditors be most likely to express an adverse opinion?
A) The chief executive officer refuses to provide the auditors access to minutes of the board of directors' meetings.
B) Tests of controls show that the entity's internal control is so ineffective that it cannot be relied upon.
C) The financial statements are not in conformity with generally accepted accounting principles regarding the capitalization of leases.
D) Information comes to the auditors' attention that raises substantial doubt about the entity's ability to continue as a going concern.

Question

Quizplus · Accepted Answer

An adverse opinion is issued when the financial statements are materially misstated and not presented in conformity with generally accepted accounting principles. If the financial statements are not in conformity with GAAP regarding a significant issue such as the capitalization of leases, auditors would express an adverse opinion on the financial statements. Choice A pertains to a lack of access to information, which would result in auditors issuing a qualified or disclaimer of opinion rather than an adverse opinion. Choice B would result in a qualified opinion as the financial statements may be misstated but not to the extent that they cannot be relied upon. Choice D pertains to uncertainty about the entity's ability to continue as a going concern, which would result in a qualified opinion rather than an adverse opinion unless the effects are pervasive.

In Which of the Following Circumstances Would Auditors Be Most