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

Which modification to an auditor's report indicates a material departure from GAAP?

1. Qualified opinion.

2. Unmodified opinion.

3. Disclaimer of opinion.

4. Adverse opinion.

The correct answer is: Adverse opinion.

An adverse opinion is issued by an auditor when the financial statements are considered to be materially misstated and do not conform to Generally Accepted Accounting Principles (GAAP). This type of modification to the auditor's report signifies that the misstatements are pervasive and significant enough to mislead the users of the financial statements. By providing an adverse opinion, the auditor is clearly stating that the financial information presented does not accurately reflect the financial position, results of operations, or cash flows of the entity in conformity with GAAP. In contrast, an unmodified opinion indicates that the financial statements present a true and fair view without any material misstatements, which does not signal any departure from GAAP. A qualified opinion suggests that, except for specific issues, the financial statements are in compliance with GAAP, thus indicating a less severe departure. A disclaimer of opinion is used when the auditor is unable to form an opinion due to a lack of sufficient appropriate evidence, but this does not directly address conformity with GAAP. Overall, an adverse opinion is the most explicit indication of a serious departure from GAAP in an auditor's report.