Auditing and Attestation - Certified Public Accountant (CPA) 2025 – 400 Free Practice Questions to Pass the Exam

When an auditor is unable to determine the reasonableness of management's estimate regarding future events, it indicates that there is significant uncertainty that could affect the financial statements. In such cases, the auditor would assess whether the lack of evidence or uncertainty is pervasive to the financial statements or limited to specific accounts or disclosures.

If the uncertainty is material but not pervasive, a qualified opinion can be expressed, indicating that the financial statements present fairly, except for the effects of the uncertainty related to management's estimate. However, if the uncertainty surrounding the estimate is pervasive, a disclaimer of opinion may be warranted, as the auditor would not be able to express an opinion on the financial statements as a whole due to insufficient evidence.

This option correctly recognizes the auditor's need to issue a qualified opinion or a disclaimer of opinion based on the materiality and pervasiveness of the uncertainty involved in management's estimate.