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

What type of opinion can an auditor express if there are significant deficiencies in internal controls?

1. Qualified opinion.

2. Unmodified opinion.

3. Adverse opinion.

4. Disclaimer of opinion.

The correct answer is: Qualified opinion.

When an auditor discovers significant deficiencies in internal controls, expressing a qualified opinion is appropriate because it indicates that, while the financial statements are generally presented fairly, there are specific areas where the internal controls are lacking. This type of opinion suggests that the identified deficiencies could potentially impact the reliability of the financial reporting, yet the overall financial statements can still be relied upon despite those weaknesses. A qualified opinion allows the auditor to communicate to users that there are some issues they should be aware of without making a sweeping statement regarding the entire set of financial statements. It strikes a balance by acknowledging the substantial deficiencies but also affirming that, overall, the financial statements do provide a fair representation of the organization's financial position. In contrast, an unmodified opinion suggests that there are no significant deficiencies and that the internal controls are working well, which does not apply in this scenario. An adverse opinion would be used if the deficiencies were so severe that they cause the financial statements to not present a fair view, while a disclaimer of opinion reflects a situation in which the auditor cannot express an opinion at all, often due to the inability to obtain sufficient appropriate audit evidence. Therefore, a qualified opinion is the correct choice when there are significant deficiencies in internal controls.