Audit and Assurance Practice Exam 2025 - Free Practice Questions and Study Guide

When an audit encounters a significant scope limitation, the appropriate action is to issue a modified opinion. A scope limitation arises when the auditor is unable to obtain sufficient appropriate audit evidence regarding any material aspect of the financial statements. Such limitations could be due to restrictions imposed by management or circumstances that prevent auditors from accessing necessary information.

When the limitations are significant, a modified opinion indicates that while the auditor was able to conduct an audit, the lack of sufficient evidence may affect the reliability of the financial statements as a whole. This modified opinion can take one of two forms: a qualified opinion or a disclaimer of opinion, depending on the severity and nature of the limitation.

A qualified opinion is issued when the limitation is material but not pervasive, meaning it has a significant impact but does not affect the overall financial statements. A disclaimer of opinion is issued when the limitation is so severe that the auditor cannot express any opinion on the financial statements due to the inability to gather evidence.

In contrast, issuing a clean opinion would misrepresent the situation, as it would suggest there were no significant limitations, while requesting additional time may not address the fundamental issue of the limitation itself. Ignoring scope limitations is not an acceptable practice in auditing, as it would diminish the credibility and reliability of