ACCA Audit and Assurance (F8) Practice Exam

What is the main indication of an adverse opinion?

1. The financial statements are fairly presented with some exceptions

2. The financial statements do not present fairly in accordance with applicable reporting framework

3. The auditor cannot obtain sufficient evidence

4. The auditor only expresses a partial opinion

The correct answer is: The financial statements do not present fairly in accordance with applicable reporting framework

An adverse opinion is issued by auditors when they determine that the financial statements do not present a true and fair view in accordance with the applicable financial reporting framework. This means that the misstatements or omissions in the financial statements are both material and pervasive, leading the auditor to conclude that the overall financial statements are misleading and do not meet the required accounting principles. When an adverse opinion is rendered, it indicates significant issues with the financial statements that compromise their reliability and usefulness for users. This includes situations where the misrepresentation of financial data could seriously impact the decisions made by stakeholders, such as investors or creditors. The other options suggest scenarios that do not align with the criteria for an adverse opinion: having exceptions indicates a qualified opinion rather than an adverse one; insufficient evidence typically results in a disclaimer of opinion; and expressing a partial opinion also leans towards a qualified opinion rather than an adverse one.