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Answer and Explanation: Explanation: If an auditor determines that the financial statements include a material departure from GAAP and the effects on the financial statement are material and pervasive they must issue an adverse opinion.
GAAP departure Situations where the financial statements deviate from the established accounting criteria. For example, a company that uses an incorrect accounting method faces a GAAP departure.
Adverse the opinion that is expressed when the auditor, having obtained sufficient appropriate audit evidence, concludes that misstatements, individually or in the aggregate, are both material and pervasive to the financial statements.
An adverse opinion is a professional opinion made by an auditor indicating that a companys financial statements are misrepresented, misstated, and do not accurately reflect its financial performance and health.
What is an Adverse Opinion? An adverse opinion can only be issued due to a GAAP departure. In such a case, the misstatements are both material and pervasive. In other words, there is a material impact on the financial statements, and the misstatements affect a large number of accounts.
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An adverse opinion indicates financial records are not in ance with GAAP and contain grossly material and pervasive misstatements. An adverse opinion may be an indicator of fraud.
The 4 types of audit opinions Unqualified opinion clean report. Qualified opinion qualified report. Disclaimer of opinion disclaimer report. Adverse opinion adverse audit report.

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