ACCA Advanced Audit and Assurance (AAA) Practice Exam

When must a qualified opinion be expressed in the auditor's report?

1. When misstatements are minimal

2. When misstatements are material but not pervasive

3. When there are no misstatements

4. When evidence is inconclusive

The correct answer is: When misstatements are material but not pervasive

A qualified opinion must be expressed in an auditor's report when misstatements are material but not pervasive to the financial statements. This situation indicates that while there are significant inaccuracies or omissions in the financial records, they do not affect the overall reliability of the financial statements in a meaningful way. The auditor's report will articulate the nature of these misstatements, allowing users of the financial statements to understand the limitations imposed by the identified issues. This approach maintains the integrity of the audit process by acknowledging the existence of material misstatements while reassuring users that the overall financial statements still present a valid picture of the organization's financial position and performance. In contrast, a situation where misstatements are minimal does not warrant a qualified opinion since they would not affect the decisions of users significantly. If there are no misstatements, the auditor would issue an unmodified opinion. Finally, when evidence is inconclusive, that scenario could lead to a disclaimer of opinion rather than a qualified opinion, as the auditor cannot form a clear judgement about the financial statements' truthfulness.