An adverse opinion is issued when which condition is satisfied?

An adverse opinion is issued when which condition is satisfied?

• A. Financial statements do not give true and fair view
• B. They are prepared on a more conservative basis
• C. They have a clean audit opinion
• D. There is no material misstatement

Answer: (A)

An adverse opinion is issued when the financial statements do not give a true and fair view. This happens when there are material and pervasive misstatements or departures from the applicable financial reporting framework, so the statements cannot be trusted to present fairly the entity’s financial position and performance. If the financial statements were simply prepared on a more conservative basis, or if there were no material misstatements, or if the auditor gave a clean opinion, none of those situations would lead to an adverse opinion.

An adverse opinion is issued when the financial statements do not give a true and fair view. This happens when there are material and pervasive misstatements or departures from the applicable financial reporting framework, so the statements cannot be trusted to present fairly the entity’s financial position and performance. If the financial statements were simply prepared on a more conservative basis, or if there were no material misstatements, or if the auditor gave a clean opinion, none of those situations would lead to an adverse opinion.