If the auditors cannot obtain evidence regarding a material accounts receivable balance but can perform alternative procedures that provide only limited assurance, which report is most likely issued?

If the auditors cannot obtain evidence regarding a material accounts receivable balance but can perform alternative procedures that provide only limited assurance, which report is most likely issued?

• A. Unqualified
• B. Qualified
• C. Adverse
• D. Disclaimer

Answer: (A)

When you can’t obtain sufficient appropriate audit evidence about a material balance, the overall ability to form an opinion on the financial statements is compromised. If the only evidence available for that balance comes from procedures that provide only limited assurance, and the balance is material enough to affect the financial statements, you typically cannot issue an unqualified opinion. In this situation the scope limitation is pervasive to the financial statements, so the proper report is a disclaimer of opinion. This differs from a qualified opinion, which would be used if the limitation or misstatement was material but not pervasive, and from an adverse opinion or the unqualified opinion, which would not be appropriate given the lack of adequate evidence on a material area.

When you can’t obtain sufficient appropriate audit evidence about a material balance, the overall ability to form an opinion on the financial statements is compromised. If the only evidence available for that balance comes from procedures that provide only limited assurance, and the balance is material enough to affect the financial statements, you typically cannot issue an unqualified opinion. In this situation the scope limitation is pervasive to the financial statements, so the proper report is a disclaimer of opinion.

This differs from a qualified opinion, which would be used if the limitation or misstatement was material but not pervasive, and from an adverse opinion or the unqualified opinion, which would not be appropriate given the lack of adequate evidence on a material area.