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

In the situation where a significant subsidiary's audited financial statements cannot be obtained, issuing a disclaimer of opinion is the appropriate response. A disclaimer of opinion indicates that the auditor was unable to gather sufficient appropriate audit evidence to form an opinion on the financial statements as a whole.

This scenario is particularly relevant when the subsidiary is significant to the overall financial statements of the parent company. The inability to obtain the audited financial statements means that the auditor cannot assess the accuracy and reliability of the subsidiary's financial information, which could materially affect the parent company's financial statements. As a result, the lack of access to essential financial data justifies a disclaimer, as the auditor is essentially stating that they cannot provide any assurance regarding the financial statements due to this limitation.

In contrast, an adverse opinion would be issued if the financial statements were materially misstated, which is not the case here; the issue is the lack of evidence rather than misstatement. A modified opinion typically suggests that there is a limitation in scope or a disagreement with management regarding accounting policies but does not reach the level of severity that requires a disclaimer. An unqualified opinion indicates that no issues were found, which is not possible in this scenario where there is missing critical information.