Management Determined It Was Probable That a Pending Litigation Claim

Management determined it was probable that a pending litigation claim would result in a material loss. The loss was disclosed in the footnotes to the financial statements but was not accrued in the income statement. If the auditors believe an accrual should be made, what type of report should be issued?

A) Standard (unmodified) report.
B) Unmodified opinion with an emphasis-of-matter paragraph.
C) Qualified opinion based on a circumstance-imposed scope limitation.
D) Qualified or adverse opinion based on a departure from GAAP.

Correct Answer:

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