ACCA Advanced Audit and Assurance (AAA) Practice Exam

What opinion is given when financial statements are materially misstated but not pervasive?

1. Unqualified opinion

2. Adverse opinion

3. Qualified opinion

4. Disclaimer of opinion

The correct answer is: Qualified opinion

A qualified opinion is issued when the auditor finds that the financial statements contain material misstatements, but these misstatements are not pervasive to the overall financial statement. This means that while there are errors or omissions that could affect the user's understanding of the financial statements, they are contained to a specific area rather than affecting the entirety of the financial reporting. This type of opinion indicates that the financial statements present a true and fair view in most aspects, except for the specific areas where the material misstatements exist. The qualified opinion allows for accurate communication regarding the credibility of the financial statements, highlighting the exceptions without completely discrediting the entire set of financial statements. An unqualified opinion, in contrast, is given when the financial statements are free from material misstatements, while an adverse opinion is reserved for situations where misstatements are both material and pervasive, rendering the financial statements as fundamentally misleading. A disclaimer of opinion indicates that the auditor was unable to obtain sufficient appropriate audit evidence to form an opinion, which is not the case here as the auditor can identify specific misstatements.