ACCA Audit and Assurance (F8) Practice Exam

Which statement best describes an unmodified Audit Report?

1. It suggests that the financial statements are not prepared according to the applicable framework.

2. It states the financial statements are presented fairly in all material respects.

3. It indicates concerns over going concern status.

4. It expresses no opinion on the financial statements.

The correct answer is: It states the financial statements are presented fairly in all material respects.

An unmodified audit report indicates that the auditor has found the financial statements to be presented fairly in all material respects, in accordance with the applicable financial reporting framework. This implies that the financial statements provide a true and fair view of the entity's financial position and performance, free from material misstatement. The phrase "presented fairly in all material respects" means that the auditor believes the financial information is reliable and adheres to the relevant accounting standards without any significant issues. This type of report is the most favorable outcome for a client, as it reflects positively on the company's financial reporting and internal controls. In contrast, the other statements relate to circumstances that would not justify an unmodified opinion. The first statement implies non-compliance with financial reporting standards, which would require a different report type. The third statement suggests there are concerns about the company's ability to continue as a going concern, which would also lead to a modified report reflecting those concerns. The last statement indicates a lack of opinion, which does not align with an unmodified report, as an unmodified opinion explicitly provides an assurance on the financial statements.