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

In what case should a CPA issue a disclaimer of opinion when assisting in preparing financial statements?

1. Determining whether management omitted disclosures.

2. Reading financial statements for obvious misstatements.

3. Ascertaining GAAP conformity.

4. Documenting lack of reliance on internal controls.

The correct answer is: Reading financial statements for obvious misstatements.

A CPA should issue a disclaimer of opinion when they are unable to obtain sufficient appropriate audit evidence to form an opinion on the financial statements. This typically occurs in situations where there are significant limitations imposed on the auditor or when the scope of the audit is restricted. When a CPA is engaged to assist in preparing financial statements, the nature of the engagement and the extent of the accountant's involvement can lead to a situation where they do not have enough information to express a positive assurance. In particular, reading financial statements for obvious misstatements involves the CPA assessing the financial statements with a limited scope and without performing detailed audit procedures. If the CPA identifies that there is an inability to gather necessary evidence to conclude adequately on the financial statements, a disclaimer becomes a suitable response. This reflects the professional limitation in expressing an opinion given the circumstances of the engagement. Other options focus on specific responsibilities rather than the overarching consequence of insufficient evidence. Determining whether management omitted disclosures, ascertaining GAAP conformity, and documenting lack of reliance on internal controls are all aspects of an auditing process, but they do not directly encapsulate the conditions under which a disclaimer of opinion would be warranted. In cases where the accountant's procedures are limited, and there is an inability to assess the overall