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

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What should Morris, CPA, do if he suspects pervasive illegal bribes?

Express an unmodified opinion.
Disclaim an opinion on the financial statements.
Express an adverse opinion.
Issue a special report.

The correct answer is: Disclaim an opinion on the financial statements.

When a CPA suspects pervasive illegal bribes, the appropriate action is to disclaim an opinion on the financial statements. This option reflects a situation where the CPA has substantial doubt about the integrity of the financial statements due to the potential impacts of illegal activities like bribery. A disclaimer of opinion indicates that the CPA cannot provide assurance regarding the financial statements' reliability because the circumstances may significantly affect the financial reporting or the overall financial position of the entity. Given that bribery can compromise the ethical and legal standards underlying financial reports, the presence of such suspicion warrants the inability to opine positively on those statements. Expressing an unmodified opinion would suggest that the financial statements present a true and fair view, which is not justifiable when illegal activities are suspected. An adverse opinion, signifying that the financial statements are misleading, would require a clear basis on which to conclude that the financial statements are fundamentally flawed, but simply suspecting bribes does not provide sufficient information to arrive at that conclusion. Issuing a special report is not applicable in this context as it pertains to specific requirements or regulatory reporting that do not fit the nature of the suspected misconduct.