When management is unable to provide an explanation for a previously unrecognized risk identified through the review analytical procedures,the auditor must issue an adverse opinion.

Question

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If management is unable to provide an explanation for a previously unrecognized risk identified through the review of analytical procedures, the auditor must evaluate the risk and whether it has a material impact on the financial statements. If the risk does have a material impact, the auditor may need to modify their opinion, potentially issuing a qualified or adverse opinion. However, if management is ultimately able to provide an explanation or if the risk is deemed immaterial, then the auditor may be able to issue an unmodified (clean) opinion.

When Management Is Unable to Provide an Explanation for a Previously