Question

When issuing an unqualified audit opinion, the auditor who evaluates the audit findings should be satisfied that the:

Select one:

a. Estimates of the total likely misstatement cannot be made.

b. Estimates of the total likely misstatement is less than the acceptable materiality level.

c. Amount and type of identified misstatements are documented in the auditor's working papers.

d. Estimates of the total likely misstatement is more than the acceptable materiality level.

Answer 1

Correct Option B i.e. Estimates of the total likely misstatement is less than the acceptable materiality level.

Reason:

While making audit plan , auditor need to set an acceptable level of materiality for different assertions based on the auditor's understanding of the entity and its environment.

After setting a materiality level, auditor while evaluating audit findings , checks whether the identified and total likely misstatements does not exceeds the already determined materiality level. In case it exceeds, auditor must gather sufficient and appropriate audit evidence to determine the level of misstatement and he would not be able to issue unqualified opinion if misstatement still persist.