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

What type of report should be issued when internal control deficiencies are noted?

1. Qualified opinion

2. Disclaimer of opinion

3. Unmodified opinion with disclosure

4. No opinion needed

The correct answer is: Unmodified opinion with disclosure

When internal control deficiencies are noted during an audit, the appropriate type of report to issue is an unmodified opinion with disclosure. This approach recognizes that while the internal controls may have deficiencies, the financial statements can still be fairly presented overall. An unmodified opinion indicates that the auditor believes the financial statements are presented fairly in all material respects, in accordance with the applicable financial reporting framework. However, when significant deficiencies in internal controls are identified, the auditor should disclose these issues in the report. This ensures that users of the financial statements are informed of the limitations of the internal controls, which could potentially impact the reliability of financial reporting but does not necessarily warrant a modified opinion. The disclosure provides transparency, allowing stakeholders to make informed decisions based on the known issues. In this context, the other types of reports would not be appropriate. A qualified opinion would be issued if there were material misstatements that could not be resolved by disclosure; a disclaimer of opinion would indicate that the auditor was unable to obtain sufficient appropriate evidence; and stating that no opinion is needed would not be suitable as the audit process typically concludes with some form of opinion regarding the financial statements. Hence, issuing an unmodified opinion with disclosure strikes the right balance between acknowledging internal control deficiencies and maintaining