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Management have excluded from the financial report the necessary disclosures in relation to a contingent liability...

Management have excluded from the financial report the necessary disclosures in relation to
a contingent liability .If this becomes an actual liability it will have a material effect on the financial
report.The item is not expected to any other material effects on the financial statements.
Explain the type of audit opinion that should be expressed.

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Answer #1

The type of audit opinion that can be expressed in the above case is Qualified Opinion The auditor, having obtained sufficient appropriate audit evidence, concludes that misstatements, individually or in the aggregate, are material but not pervasive to the financial statements, or the auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion but concludes that the possible effects on the financial statements of undetected misstatements, if any, could be material but not pervasive. since the item not disclosed in case contingent liability if it becomes an actual liability it is having a material effect but not having a pervasive effect.

A qualified opinion is given in matters in which issues discovered in the financial statements are not pervasive and do not misrepresent the actual financial position of a business. It is a reflection of the auditor’s inability to give an unqualified opinion.

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