ACCA Advanced Audit and Assurance (AAA) Practice Exam

Which of the following best describes a qualified opinion?

1. Issued when all financial statements are correct

2. Issued when there are widespread minor misstatements

3. Issued when there is a material misstatement but not pervasive

4. Issued when an unqualified opinion cannot be given

The correct answer is: Issued when there is a material misstatement but not pervasive

A qualified opinion is a type of audit opinion issued by auditors when they encounter material misstatements in the financial statements, but these misstatements are not considered pervasive to the overall financial statements. This means that while the misstatement affects the accuracy of certain financial information, it does not undermine the entire financial picture presented by the statements. When auditors opt for a qualified opinion, they are acknowledging that the financial statements are generally accurate and reliable, except for the specific area where the material misstatement exists. This communicates to users that there is an issue that they should be aware of, while still conveying that the majority of the financial reporting is sound. The other options do not accurately reflect the definition of a qualified opinion. For instance, stating that there are "widespread minor misstatements" does not justify a qualified opinion unless those misstatements are material and affect the overall impression of the financial statements' truthfulness. Similarly, an assertion that a qualified opinion is given when an unqualified opinion cannot be presented is somewhat correct but lacks the specificity needed; the emphasis should be on the nature of the misstatement itself rather than just the impossibility of giving an unqualified opinion. Therefore, the focus on a material misstatement, as indicated in