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which of the following is false
1. auditor will express an opinion as to whether the FS show a true and fair view
2. the audit opinion will provide a reasonable assurance
3. if the FS are found to contain material misstatements a negative opinion will be given
4. an audit may not detect all fraud and error in FS
the answer given is 3.
i dont understand…. what wd the auditors do if they found material misstatements in FS?
thank u in advance
The problem is the use of the term ‘negative opinion’. This is not a proper term. If there is a material misstatement in the FS, the audit opinion will either be:
(a) qualified eg Except for the overstatement of inventories by $100,000….. the FS give a true and fair view
or, if the misstatement is pervasive:
(b) adverse eg Because inventories have been overstated by $100,000 the FS do not show a true and fair view
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