CPA Audit Practice Exam

A piecemeal opinion can be expressed by an auditor when the complete set of financial statements is adverse, meaning that the auditor has found significant issues that would lead to an overall negative opinion on the financial statements as a whole. However, in certain circumstances, the auditor may still provide an opinion on a specific element or component of the financial statements. This can occur when the adverse findings do not affect the specific element under consideration, allowing the auditor to express a separate opinion on that portion.

For instance, if a company's overall financial health is poor (resulting in an adverse opinion), but a specific line item—such as revenue from a particular segment—stands up to scrutiny and complies with accounting standards, the auditor might express a piecemeal opinion on that line item. Essentially, this allows users of the financial statements to gain insight into specific areas that might still be functioning well despite overall poor performance.

The other circumstances outlined in the options do not align with the principles guiding piecemeal opinions. Major components or elements do not inherently qualify an auditor for a piecemeal opinion—such opinions are only issued when the overall adverse nature of the complete set does not overshadow the validity of specific components. Similarly, a previous lack of an