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

What is the implication of including a statement regarding the asset portion when there is a disclaimer of opinion?

1. It is appropriate if the disclaimer paragraph properly describes the limitation.

2. It is not appropriate due to the prohibition on reporting on a single basic financial statement.

3. It is appropriate if included in a separate paragraph before the disclaimer.

4. It is not appropriate since it may overshadow the disclaimer.

The correct answer is: It is not appropriate since it may overshadow the disclaimer.

When an auditor issues a disclaimer of opinion, it indicates that they were unable to obtain sufficient appropriate audit evidence to form an opinion on the financial statements as a whole, and thus they cannot express an opinion on them. Including a statement regarding the asset portion in this scenario could detract from the significance of the disclaimer itself. A disclaimer already highlights the limitations encountered during the audit process, and adding a positive assertion about the asset portion could mislead users into thinking that the audit provided some level of assurance regarding that specific area. This can result in a misunderstanding of the auditor's role and the audit findings, potentially leading to a false sense of security. Thus, including a statement that could overshadow the overall disclaimer would not align with the principles of clarity and transparency expected in audit communications. The focus should remain solely on the limitations expressed in the disclaimer, rather than introducing other aspects that might imply an evaluation of specific items within the financial statements. Therefore, avoiding any statements regarding the asset portion helps ensure that the disclaimer remains the focal point, emphasizing the lack of opinion due to insufficient evidence.