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

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Which of the following statements is true regarding auditor opinions?

  1. The auditor may issue a qualified opinion for a significant related party transaction.

  2. The auditor may not issue an unmodified opinion for a properly accounted material accounting change.

  3. If substantial doubt exists about an entity's ability to continue, the auditor may not issue an unmodified opinion.

  4. The auditor may issue an unmodified opinion despite a material departure from GAAP.

The correct answer is: The auditor may issue an unmodified opinion despite a material departure from GAAP.

The statement that the auditor may issue an unmodified opinion despite a material departure from GAAP is inaccurate because an unmodified opinion indicates that the financial statements present a true and fair view in accordance with the applicable financial reporting framework, such as GAAP. If there is a material departure from GAAP, the auditor's responsibility is to express concern, which would typically result in a modification of their opinion, either in the form of a qualified or adverse opinion, depending on the severity and pervasiveness of the departure. In contrast, a qualified opinion is generally issued when there are specific areas where the financial statements are not in accordance with GAAP, but these deviations are not pervasive. The first statement regarding significant related party transactions aligns with this, as such transactions could lead the auditor to issue a qualified opinion if they affect the financial statements materially. The second statement asserts that an unmodified opinion cannot be issued for a properly accounted material accounting change. However, if a material accounting change is properly reflected in the financial statements and disclosed appropriately, the auditor may indeed issue an unmodified opinion. The third statement correctly identifies that if substantial doubt exists about an entity's ability to continue as a going concern, the auditor cannot issue an unmodified opinion. In such cases

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