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

Which of the following circumstances would require a disclaimer from the CPA when auditing?

1. Audit was performed per the appropriate guidelines.

2. Statements were examined under GAAS.

3. Financial statements are prepared on an unusual basis.

4. Management refuses to provide necessary information.

The correct answer is: Financial statements are prepared on an unusual basis.

A disclaimer of opinion is issued by a CPA when there are significant limitations on the scope of the audit, which prevents the auditor from forming an opinion on the financial statements. The correct answer is that financial statements prepared on an unusual basis would definitely necessitate a disclaimer because this deviation from standard accounting frameworks may lead to ambiguities in interpreting the statements, affecting the auditor's ability to provide a clear opinion. When financial statements are prepared using a basis of accounting that is not widely accepted or understood, it poses challenges in assessing whether the statements give a true and fair view. This unusual basis could include methods that diverge from Generally Accepted Accounting Principles (GAAP) or other recognized standards that would typically guide an audit. In contrast, if the audit was performed per the appropriate guidelines or if the statements were examined under GAAS, these scenarios indicate that the auditor is following established practices, which would not suggest issuing a disclaimer. Additionally, management's refusal to provide necessary information would typically lead to an adverse opinion rather than a disclaimer, as the CPA could indicate that the lack of information significantly affects the reliability of the statements. Hence, the key aspect of preparing financial statements on an unusual basis distinctly aligns with the need for a disclaimer since it hinders the auditor's