Audit and Assurance Practice Exam

Which statement about audit reporting is true?

1. Auditors must provide negative assurance.

2. The auditor provides an opinion based on findings.

3. The auditor can choose not to express an opinion.

4. The auditor's opinion is always unqualified.

The correct answer is: The auditor provides an opinion based on findings.

The statement that the auditor provides an opinion based on findings is accurate and reflects the fundamental nature of audit reporting. Auditors perform a systematic examination of financial statements and various aspects of an organization's operations to gather evidence. Based on the evidence collected during the audit process, the auditor assesses whether the financial statements are free of material misstatement and comply with the relevant financial reporting framework. The auditor's opinion can take various forms, including unqualified, qualified, adverse, or disclaimer opinions, depending on the results of the audit. An unqualified opinion indicates that the financial statements present a true and fair view in accordance with the applicable reporting standards, while qualified opinions suggest the presence of certain issues but do not undermine the overall fairness of the statements. Adverse opinions indicate significant problems, while a disclaimer expresses an inability to form an opinion due to a lack of sufficient evidence. Understanding this process is crucial as the auditor's opinion is a key component that communicates the reliability of the financial statements to stakeholders. This aspect emphasizes the role of the auditor in enhancing the credibility of financial reporting through objective assessment based on thorough examination and evaluation of evidence.