Auditing and Attestation - Certified Public Accountant (CPA) Practice Exam 2026 - Free CPA Practice Questions and Study Guide

When auditors cannot verify the opening inventory, it creates a significant limitation on the scope of the audit. The opening inventory has a direct impact on the financial statements because it affects both the cost of goods sold in the income statement and the ending inventory reported on the balance sheet. Therefore, the inability to verify the opening inventory raises concerns about the reliability of the financial statements as a whole.

In this context, the correct option allows for the issuance of an unmodified opinion on the balance sheet because the auditor may be able to verify other aspects of the assets and liabilities, provided they have sufficient appropriate audit evidence for those items. However, since the opening inventory cannot be verified, this results in a limitation regarding the income statement, leading to a disclaimer for that statement. A disclaimer acknowledges that the inability to obtain sufficient evidence about the opening inventory means that the auditor cannot express an opinion regarding the completeness or accuracy of that financial statement.

This approach effectively communicates the auditor’s position: while the financial statements may be reasonably stated in other respects, there exists a specific area (the income statement, due to the inventory issue) where the auditor cannot obtain the necessary assurance. This nuanced opinion reflects the complexities involved in financial reporting and auditing standards, as the emphasis is placed on the