ACCT3002 Chap.9 Completion and Audit Opinions
Completion and Audit Opinions
Completion evaluates known and projected misstatements, subsequent events, going concern, uncorrected differences and whether the evidence obtained is sufficient. Opinion selection starts by distinguishing a known financial-statement misstatement from an inability to obtain evidence. A material but non-pervasive issue usually leads to qualification.
Pervasive known misstatement leads toward adverse opinion, while pervasive possible effects of an evidence limitation lead toward disclaimer. An emphasis paragraph cannot cure a required modification.
What this chapter covers
- 01
Final analytical review
- 02
Projected misstatement
- 03
Subsequent events
- 04
Evidence limitation
- 05
Pervasiveness
- 06
Modified opinions
Worked example · free
Separate misstatement from scope limitation
- 2Classify the first issue as a known misstatement and the second as an evidence limitation.
- 1Treat the contained material misstatement as qualified rather than pervasive.
- 1Treat the broad possible effects of missing evidence as material and pervasive.
- 2Select a disclaimer route for the second case after considering alternative procedures.
Key terms
- Qualified opinion
- A qualified opinion reports a material issue whose effects are not pervasive, whether from misstatement or evidence limitation.
- Adverse opinion
- An adverse opinion states that identified misstatements are material and pervasive to the financial statements.
- Disclaimer opinion
- A disclaimer communicates that sufficient appropriate evidence could not be obtained and possible effects may be material and pervasive.
- Subsequent event
- A subsequent event occurs after the reporting date and may provide evidence about conditions existing then or require disclosure of later conditions.
Completion and Audit Opinions FAQ
What is the first step in choosing a modified opinion?
Identify the cause. Decide whether the statements contain a known misstatement or the auditor cannot obtain sufficient appropriate evidence. Only then assess materiality and pervasiveness. The same severity can lead to different opinion types because the causes differ.
When is an issue pervasive?
Pervasiveness may mean effects are not confined to particular elements, could represent a substantial proportion of the statements, or are fundamental to users' understanding. It is a judgement about reach and importance, not simply a larger number.
Can an emphasis paragraph replace a modification?
No. Emphasis can draw attention to an appropriately presented or disclosed matter when the reporting requirements permit it. It does not repair a material misstatement or an inability to obtain evidence that requires a modified opinion.
What work should precede the opinion decision?
Update risk assessments, complete outstanding procedures and evaluate whether the evidence is sufficient and appropriate. Accumulate detected differences, project sample findings where relevant and consider their aggregate and qualitative effects against reassessed materiality. Review subsequent events, going concern, related parties, estimates, disclosures and final analytical relationships.
Obtain representations without treating them as a substitute for other evidence, communicate significant matters to governance and resolve contradictory information. Identify any area where alternative procedures could overcome an evidence gap.
Only after that completion work should the auditor classify an unresolved matter as a known misstatement or an inability to obtain evidence and assess whether its effect is confined or pervasive. The opinion is the end of the reasoning chain, not the first label chosen from a conspicuous fact.
How can I distinguish adverse from disclaimer without memorising labels?
Ask what the auditor knows. When sufficient evidence establishes that the statements contain a material and pervasive departure, the issue is a known misstatement and the route is adverse. When sufficient evidence cannot be obtained and the possible effects could be material and pervasive, the route is disclaimer.
A contained material problem in either branch ordinarily points toward qualification, but the basis wording differs. Pervasiveness can arise because effects are not confined, represent a substantial proportion, or are fundamental to users' understanding. Management's refusal to correct a known error does not convert it into a scope limitation.
Likewise, an emphasis paragraph draws attention to an appropriately presented matter; it does not replace a modification required by misstatement or missing evidence.
What four words anchor the opinion decision tree?
Use cause, evidence, materiality and reach. Cause distinguishes a known reporting departure from an inability to obtain evidence. Evidence asks whether alternatives have been exhausted and contradictions resolved. Materiality measures actual or possible influence on users. Reach asks whether the matter is confined or pervasive.
Mapping the facts through those words produces qualification, adverse opinion or disclaimer logically and also shows why an emphasis paragraph cannot replace a required modification.
Exam move
Use a two-by-two matrix with cause on one axis and pervasiveness on the other. Place qualified, adverse and disclaimer in the correct cells and practise explaining why. For completion cases, list known errors, projected errors, subsequent events and unresolved evidence gaps before selecting any report. Close every answer by connecting the cause and reach to the opinion rather than naming it from memory.
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