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

When an auditor qualifies an opinion due to inadequate disclosure, what should be included in the auditor's report?

1. An explanation of the auditor's findings

2. A direct reference to the client’s management

3. A description of the omitted information in a separate paragraph

4. An emphasis on the financial statement's overall accuracy

The correct answer is: A description of the omitted information in a separate paragraph

When an auditor qualifies an opinion due to inadequate disclosure, it is essential for the auditor's report to include a description of the omitted information in a separate paragraph. This practice is crucial because it informs users of the financial statements about the specific areas where disclosure was found lacking. By detailing the omitted information, the auditor enhances transparency and provides context regarding the impact of the inadequate disclosure on the overall reliability of the financial statements. Including this description allows users of the financial statements to make informed decisions and understand the extent to which the financial reporting may be incomplete. The separate paragraph also distinguishes the qualification from other portions of the report, making it clear to the readers which aspects of the financial statements are being challenged due to lack of sufficient information. Additionally, this approach aligns with the auditor's responsibility to communicate clearly and effectively about any qualifications in their opinion. It helps ensure that stakeholders are made aware of significant issues that could affect their understanding of the financial statements, thus promoting accountability and adherence to auditing standards.