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

An unmodified opinion is appropriate when the financial statements are presented fairly and in accordance with the applicable financial reporting framework. In the case where prior year’s financials were audited by another CPA and there is no reference to those statements in the current auditor’s report, the current auditor may still provide an unmodified opinion on the current year's financial statements as long as they have performed their own audit in accordance with professional standards.

When the prior year's financials were audited by another CPA, it does not affect the current audit opinion directly as long as the current auditor does not disclaim the reliance on those prior-year financials. The current year’s audit must be assessed independently, and if everything is in order according to the relevant accounting standards, an unmodified opinion can be issued.

The other scenarios provided involve situations that could impair the auditor’s ability to give an unmodified opinion. For example, if an accounting matter affects comparability with prior years, it may necessitate an explanatory paragraph in the audit report rather than an unmodified opinion. Similarly, the inability to obtain audited statements for a foreign investment or the absence of a statement of cash flows would pose issues that could impede an unmodified opinion due to the lack of essential financial information that affects the overall view of