In a CPA engagement, what is required if significant assumptions in financial statements are not disclosed?

When significant assumptions in financial statements are not disclosed, the appropriate response from an auditor is to issue an adverse opinion. This occurs because the lack of transparency related to significant assumptions is a critical issue that directly affects the reliability and completeness of the financial statements.

An adverse opinion indicates that the financial statements do not present a true and fair view of the entity’s financial position, and the missing disclosures compromise the users' understanding of the financial information. It signals to stakeholders that the financial statements are materially misstated, which could lead to significant implications for decision-making processes based on that information.

The other types of opinions—such as an unqualified opinion, which signifies that the financial statements are free from material misstatement, or a qualified opinion, which communicates that there are certain exceptions but the rest of the statements are fairly presented—would not be suitable in this context. A disclaimer of opinion, on the other hand, suggests that the auditor could not obtain sufficient appropriate evidence to form an opinion, which is different from the situation where significant assumptions are simply not disclosed. In cases where critical disclosures are missing, the choice of an adverse opinion effectively emphasizes the seriousness of the oversight in the financial reporting.