An auditor may choose to disclaim an opinion for several reasons, primarily revolving around insufficient information or limitations imposed by the client.
1. Client’s Failure to Present Supplementary Information: If the client does not provide necessary supplementary information that is required by the Financial Accounting Standards Board (FASB), the auditor might be unable to form a complete understanding of the financial statements. This lack of information can lead auditors to conclude that they cannot express an opinion on the financial statements.
2. Inadequate Disclosure of Material Information: When there is a failure to adequately disclose material information in the financial statements, auditors may feel that the statements do not present a true and fair view of the company’s financial position. In these cases, it becomes challenging for auditors to provide a clear opinion, prompting them to disclaim.
3. Client-Imposed Scope Limitations: A client may impose restrictions on the auditor’s scope of work. For example, if the auditor is not allowed to examine certain areas, records, or transactions that they deem necessary for their audit, this can significantly hinder their ability to form an opinion and result in a disclaimer.
In conclusion, a disclaimer of opinion is a way for auditors to express that they could not obtain sufficient appropriate evidence to provide a clear opinion on the financial statements, often due to the client’s actions or omissions.