If the company fails to disclose related party transactions, what type of audit opinion should be issued?
Since U.S. GAAP requires a company to disclose every related party transaction (regardless of materiality), if the company doesn’t adequately disclose the transactions, then that represents a departure from GAAP.
If the issue is material and pervasive, then the audit team should issue an adverse opinion, but if the issue is only material, then a qualified opinion will likely be issued.
You might also be interested in...
What are the three types of modified opinions?
If the auditor has determined that, after performing all necessary audit procedures, that there are material departures from the conceptual framework, the auditor may issue a modified opinion. The three types of modified opinions include a qualified opinion, adverse opinion, and disclaimer of opinion.
What is an adverse opinion?
Whether the entity being audited is an issuer or a nonissuer, an adverse opinion would be distributed if there is a material departure from U.S. GAAP (financial reporting issues), and those departures are both deemed material and pervasive by the auditor. Some reasons for an auditor issuing an adverse opinion will be due to: 1) […]
What is qualified opinion?
A qualified opinion will be issued by an auditor if, after conducting audit tests, the auditor has determined that “except for the issue being described”, the financial statements have been presented in accordance with the applicable financial reporting framework, and no material modifications exist. Therefore, this is an issue that is not considered material or […]