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

If financial statements deviate from U.S. GAAP due to unusual circumstances, what opinion should the auditor express?

1. Unmodified.

2. Adverse.

3. Qualified or adverse, depending on pervasiveness.

4. Qualified.

The correct answer is: Unmodified.

In situations where financial statements deviate from U.S. GAAP due to unusual circumstances, the appropriate auditor's opinion would be an unmodified opinion if those departures are adequately justified and disclosed in the financial statements. An unmodified opinion indicates that the financial statements present a true and fair view of the organization’s financial position, even if there are some deviations from the established accounting framework. This is particularly relevant when the deviations stem from unusual and rare circumstances that are well explained. If the management provides sufficient rationale, detailing how the financial reporting reflects the underlying economics of the transactions, and if the financial statements include appropriate disclosures regarding these departures, the overall integrity of the financial reporting can still be upheld under an unmodified opinion. In contrast, if the deviations were pervasive and not adequately disclosed or justified, a qualified or adverse opinion would be required. A qualified opinion indicates that there are specific issues with the financial statements, but that overall they still provide a fair representation. An adverse opinion suggests that the financial statements do not present a true and fair view, typically when the departures are significant and pervasive. Thus, the context and the nature of the departures from GAAP are critical in determining the correct type of opinion; in this case, an unmodified opinion