4 Determining modification type
It is up to the auditor to decide what modification is appropriate in the circumstances of the engagement. However, for each type of modification certain conditions must be fulfilled.
4.1 Qualified opinion
The auditor shall express a qualified opinion if:
- Based on the audit evidence obtained auditor concludes that misstatements in the financial statements are material but not pervasive individually or in aggregate.
- Auditor is unable to gather sufficient appropriate audit evidence to form basis of conclusion however, he concludes that undetected misstatements could be material but not pervasive.
4.2 Adverse opinion
As a result of audit procedures sufficient appropriate audit evidence has been obtained and on the basis of such evidence auditor concludes that misstatements in financial statements are material and pervasive.
In such case auditor shall express adverse opinion.
4.3 Disclaimer of opinion
As a result of audit procedures auditor is unable to gather sufficient appropriate audit evidence. And thus auditor is unable to form any conclusions regarding financial statements and thus he concludes that undetected misstatements in the financial statements could be both material and pervasive.
In very rare circumstances, even if sufficient appropriate audit evidence is obtained for other aspects of the financial statements, due to multiple uncertainties auditor is unable to conclude regarding effects of such uncertainties on financial statements therefore, cannot express any opinion.