Under which of the following circumstances would a disclaimer of opinion not be appropriate?
A.
The financial statements fail to contain adequate disclosure of related party transactions.
B.
The client refuses to permit its attorney to furnish information requested in a letter of audit inquiry.
C.
The auditor is engaged after fiscal year-end and is unable to observe physical inventories or apply alternative procedures to verify their balances.
D.
The auditor is unable to determine the amounts associated with illegal acts committed by the client's management.
Suggested Answer:A🗳️
Choice "a" is correct. The failure of the financial statements to contain adequate disclosure of related party transactions, or other required disclosures, would result in a qualified or adverse opinion, not a disclaimer of opinion. Choice "b" is incorrect. A client's refusal to permit its attorney to furnish information requested in a letter of audit inquiry would generally result in a disclaimer of opinion. Choice "c" is incorrect. The auditor's inability to observe physical inventories or apply alternative procedures to verify their balances could result in a disclaimer. Choice "d" is incorrect. The auditor's inability to determine the amounts associated with illegal acts committed by the client's management could result in a disclaimer.
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