When the auditor is unable to determine the amounts associated with the illegal acts of entity personnel because of an inability to obtain adequate evidence, the auditor should issue a(n)
A) "Subject to" qualified opinion.
B) Disclaimer of opinion.
C) Adverse opinion.
D) Unqualified/unmodified opinion with a separate explanatory/emphasis-of-matter paragraph.

Question

Quizplus · Accepted Answer

When the auditor is unable to obtain adequate evidence to determine the amounts associated with illegal acts, the auditor should issue a disclaimer of opinion because the auditor is unable to provide an opinion on the financial statements as a whole. A qualified opinion (choice A) is not appropriate because it suggests that the financial statements are fairly presented except for a specific matter, but the illegal acts may have a pervasive effect on the financial statements. An adverse opinion (choice C) would only be appropriate if the financial statements are materially misstated, which may not be the case if the amounts associated with the illegal acts cannot be determined. An unqualified/unmodified opinion with an explanatory/emphasis-of-matter paragraph (choice D) would not provide sufficient emphasis on the limitations of the audit evidence related to the illegal acts.

When the Auditor Is Unable to Determine the Amounts Associated