Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

If a nonprofit entity's financial statements are audited and fairly presented according to a regulatory basis, what type of opinion should be issued?

1. Qualified opinion.

2. Disclaimer of opinion.

3. Single unmodified opinion on the special purpose financial statements.

4. Standards three paragraph report with reference to footnote disclosure.

The correct answer is: Single unmodified opinion on the special purpose financial statements.

When a nonprofit entity's financial statements are audited and fairly presented according to a regulatory basis, the appropriate type of opinion to issue is a single unmodified opinion on the special purpose financial statements. This is because a regulatory basis, which often differs from Generally Accepted Accounting Principles (GAAP), is a predefined framework that has been agreed upon for the preparation of the financial statements. An unmodified opinion indicates that the auditor believes the financial statements present a true and fair view of the entity's financial position and results of operations in accordance with the specified regulatory basis. This type of opinion suggests that the auditor did not find any significant omissions or misstatements that would require a qualification of their opinion. Additionally, issuing a single unmodified opinion is consistent with the reporting on special purpose frameworks, which cater to specific needs of the users of the financial statements. Therefore, when the financials are in accordance with a regulatory basis and there is no need for limitation or modification, the issuance of this type of opinion is completely appropriate. The context of the other options includes situations where qualifications or disclosures may be necessary, such as when the financial statements contain material misstatements (leading to a qualified opinion) or when an auditor cannot obtain sufficient appropriate audit evidence (leading to a