When the auditor determines the financial statements are fairly stated and then determines that the auditor lacks independence, the auditor should issue:
A) an adverse opinion.
B) a disclaimer of opinion.
C) either a qualified opinion or an adverse opinion.
D) either a qualified opinion or an unqualified opinion with modified wording.

Question

Quizplus · Accepted Answer

When the auditor determines that they lack independence, they are not able to provide an opinion and should issue a disclaimer of opinion. This is because independence is a fundamental requirement for auditors and without it, their opinion cannot be considered reliable. Option A is incorrect because an adverse opinion is issued when the financial statements are materially misstated, not when the auditor lacks independence. Option C is incorrect because a qualified opinion is issued when there are material misstatements in the financial statements, but they are not pervasive enough to require an adverse opinion. Option D is incorrect because an unqualified opinion with modified wording is issued when there are concerns that need to be brought to the attention of the users of the financial statements, but overall the statements are fairly presented. However, lack of independence goes beyond just a concern and warrants a disclaimer of opinion.

When the Auditor Determines the Financial Statements Are Fairly Stated