ACCA Audit and Assurance (F8) Practice Exam

What does a disclaimer of opinion entail?

1. The auditor has insufficient evidence to assess whether the financial statements are free from material misstatement

2. The financial statements may be presented fairly with certain misstatements

3. The auditor expresses an opinion without qualification

4. It suggests minor issues in the financial statements

The correct answer is: The auditor has insufficient evidence to assess whether the financial statements are free from material misstatement

A disclaimer of opinion occurs when the auditor concludes that there is insufficient evidence to determine if the financial statements are free from material misstatement. This situation often arises when there are significant uncertainties, limitations on the scope of the audit, or when the auditor is unable to gather the necessary information to form a reasonable basis for their opinion. Using this approach, the auditor communicates to stakeholders that they cannot express an opinion on the financial statements due to the lack of adequate evidence. This does not imply that the financial statements are correct; rather, it indicates that the auditor could not obtain sufficient audit evidence to form any opinion, whether favorable or unfavorable. In contrast, other options address different situations. For instance, stating that the financial statements may be presented fairly with certain misstatements implies a qualified opinion, which would indicate the presence of material misstatement but also that the auditor could express limited assurance. Expressing an opinion without qualification suggests a clean opinion, which does not align with the essence of a disclaimer. Lastly, indicating minor issues does not capture the serious nature of a disclaimer, which reflects significant unresolved uncertainties rather than trivial concerns.