Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

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How should an auditor refer to an insufficiency of audit evidence in the report?

  1. The Situation should be noted in the Notes to the financial statements

  2. The Situation should be in the Basis for Qualified Opinion

  3. It should be addressed in both sections of the report

  4. No reference needed in either section

The correct answer is: No reference needed in either section

An auditor should handle an insufficiency of audit evidence through a nuanced understanding of the implications for the audit opinion. If an auditor concludes that there is not enough appropriate audit evidence to form a basis for an opinion on the financial statements, this situation may be indicative of significant limitations that could potentially lead to a qualified opinion or even an adverse opinion depending on the severity and implications. While an insufficiency of audit evidence may suggest deficiencies in internal control or operations, it is not always explicitly required to be referenced in the audit report itself, especially if it does not affect the auditor’s opinion. In instances where the audit evidence obtained is sufficient to support the auditor's opinion, but there are some areas of uncertainty or limitations, the auditor may determine that there is no need for specific disclosure in either the opinion section or the notes of the financial statements. This approach aligns with the guidance provided in auditing standards, where the focus is primarily on whether the evidence obtained is sufficient to support the conclusion reached. If it does not rise to the level of necessitating communication in the financial statements or report, then no formal reference is required in either portion of the audit report. Thus, concluding that no reference is needed reflects the auditor’s judgment regarding the significance of the insufficiency of