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

What could create a scope limitation sufficient to prevent an unmodified opinion?

1. Management requests not to confirm certain accounts.

2. The auditor engages after the year-end physical inventory.

3. The auditor cannot review predecessor documentation.

4. Management refuses to acknowledge responsibility for fair presentation.

The correct answer is: Management refuses to acknowledge responsibility for fair presentation.

The situation where management refuses to acknowledge responsibility for the fair presentation of financial statements is critical in the auditing process. Such a refusal undermines the auditor's ability to evaluate whether the financial statements are presented in accordance with the applicable financial reporting framework. Auditors rely on management's representations to some extent, and if management does not accept their responsibilities, it raises significant concerns about the integrity and reliability of the financial statements. This scenario leads to a scope limitation because the auditor cannot gather sufficient appropriate audit evidence to support their opinion on the financial statements. When management does not acknowledge its responsibility, the auditor may face challenges in forming a basis for an unmodified opinion, often leading them to either issue a modified opinion or withdraw from the engagement altogether. In contrast, other options present situations that may create challenges but are not necessarily indicative of a complete refusal by management to comply with necessary responsibilities. Therefore, the refusal to accept responsibility for fair presentation directly impacts the auditor's ability to reach an unmodified opinion due to the inherent implications for the reliability of the financial statements.