Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

An auditor may not issue a qualified opinion when which of the following occurs?

1. Misstatements of financial statements

2. Lack of independence from the audited entity

3. Referring to a specialist's work

4. Scope limitation preventing a critical audit procedure

The correct answer is: Lack of independence from the audited entity

The correct answer is related to the auditor's independence from the audited entity. When an auditor lacks independence, it fundamentally undermines the integrity of the audit process. Independence is a cornerstone of the auditing profession, as it ensures that the auditor can provide an objective and impartial report on the financial statements of the entity being audited. In situations where independence is compromised, the auditor cannot provide an opinion—qualified or otherwise—because the audit may not be considered reliable or trustworthy. Therefore, in such cases, the auditor would have to issue a disclaimer of opinion instead, indicating that they cannot express an opinion due to lack of independence. Misstatements of financial statements, referring to a specialist's work, and scope limitations related to audit procedures involve issues that may lead the auditor to issue a qualified opinion under certain circumstances. In these situations, the auditor usually has sufficient independence and can still evaluate the financial statements based on available evidence, allowing for the possibility of a qualified opinion due to specific constraints or findings identified during the audit.