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

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Study for the Auditing and Attestation CPA Exam. Focus on key auditing concepts and attestation standards with multiple choice questions and detailed explanations. Boost your exam readiness today!

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What is the effect on the opinion if a significant limitation is imposed by the client during an audit?

Adverse opinion is required
Unmodified opinion is likely
Qualified or disclaimer opinion
No opinion can be issued

The correct answer is: Qualified or disclaimer opinion

When a significant limitation is imposed by the client during an audit, the auditor must assess how this limitation affects their ability to gather sufficient appropriate audit evidence to form their opinion. If the limitation is significant enough to preclude the auditor from obtaining a complete understanding of the financial statements, it can lead to either a qualified opinion or a disclaimer of opinion. A qualified opinion indicates that the financial statements are fairly presented except for the effects of the matter to which the qualification relates, meaning there is a scope limitation. A disclaimer of opinion, on the other hand, occurs when the auditor is unable to form an opinion because the limitation is so extensive that it prevents a proper audit from being conducted. In summary, if a significant limitation by the client impacts the audit process, the auditor will ultimately issue either a qualified opinion or a disclaimer, depending on the severity of the limitation and its effect on the financial statements overall. This reflects the auditor's inability to provide full assurance due to the constraints faced.