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

When can an auditor express a qualified opinion regarding the evaluation of estimated losses?

1. When the estimates are reliably predictable.

2. When there is reasonable support for management's assertions.

3. When there is uncertainty causing scope limitations.

4. When appropriate disclosures are made.

The correct answer is: When there is uncertainty causing scope limitations.

An auditor expresses a qualified opinion when there are significant uncertainties related to the financial statements but the overall financial position is still fairly presented. In the case of estimated losses, if there is uncertainty that leads to a limitation on the scope of the audit, this can affect the auditor's ability to gather sufficient appropriate audit evidence. When there are uncertainties that result in scope limitations, it indicates that the auditor cannot obtain evidence that is adequate to support their opinion, particularly regarding management's estimates of losses. This situation could arise from various factors, such as insufficient access to records or limitations imposed by management that prevent the auditor from fully assessing the adequacy of reserves or contingencies. In this context, a qualified opinion would communicate to users of the financial statements that, while the statements generally present a fair view, there are unresolved uncertainties that could impact the reported figures. Thus, it informs users that they should be aware of the limitations and uncertainties surrounding management's assessments related to estimated losses, reflecting both the auditor's responsibility and the inherent uncertainty present in financial reporting. The other options do not appropriately address the circumstances under which a qualified opinion is warranted. For example, if estimates are reliably predictable or there is reasonable support for management's assertions, the situation would generally not warrant a