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

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If an auditor is unable to determine whether management's estimate of future events is reasonable, what type of opinion should be expressed?

An unmodified opinion with no additional paragraphs.
A qualified opinion or a disclaimer of opinion.
An unmodified opinion with an emphasis-of-matter paragraph.
A qualified opinion or an adverse opinion.

The correct answer is: A qualified opinion or a disclaimer of opinion.

When an auditor is unable to determine the reasonableness of management's estimate regarding future events, it indicates that there is significant uncertainty that could affect the financial statements. In such cases, the auditor would assess whether the lack of evidence or uncertainty is pervasive to the financial statements or limited to specific accounts or disclosures. If the uncertainty is material but not pervasive, a qualified opinion can be expressed, indicating that the financial statements present fairly, except for the effects of the uncertainty related to management's estimate. However, if the uncertainty surrounding the estimate is pervasive, a disclaimer of opinion may be warranted, as the auditor would not be able to express an opinion on the financial statements as a whole due to insufficient evidence. This option correctly recognizes the auditor's need to issue a qualified opinion or a disclaimer of opinion based on the materiality and pervasiveness of the uncertainty involved in management's estimate.