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

If an auditor encounters a scope limitation, what is a likely outcome?

1. Unmodified opinion with an explanation of the limitation.

2. Qualified opinion or disclaimer of opinion.

3. Adverse opinion due to misstatement.

4. Unqualified opinion with a standard report.

The correct answer is: Qualified opinion or disclaimer of opinion.

When an auditor encounters a scope limitation, the most likely outcome is a qualified opinion or a disclaimer of opinion. A scope limitation arises when the auditor is unable to obtain sufficient appropriate audit evidence. This situation can occur for various reasons, such as restrictions imposed by the client, circumstances such as natural disasters that prevent access to certain records, or unavailability of necessary information. In the case of a qualified opinion, the auditor concludes that, except for the effects of the scope limitation, the financial statements present a true and fair view. This means that there are some areas where evidence could not be obtained, but the remaining areas are fairly presented. On the other hand, if the scope limitation is so significant that the auditor cannot conclude on the overall financial statements, a disclaimer of opinion is issued. This indicates that the auditor does not express an opinion on the financial statements due to the inability to gather sufficient evidence. Unmodified opinions, particularly those that include explanations of limitations, typically indicate that the auditor has obtained all the necessary evidence to support their opinion, which is not the case when a scope limitation is present. Similarly, an adverse opinion is issued when there are misstatements that materially affect the financial statements, rather than due to a lack of sufficient evidence.