Which statement about modifying an audit report is not true?

• A. A one-paragraph report is generally used when the auditor is not independent.
• B. A modification of the audit report that involves modified wordings may contain an unqualified opinion.
• C. An addition of another paragraph to an otherwise standard audit report always requires a modification of an unqualified opinion.
• D. An unqualified opinion may be issued though the audit report requires an additional explanatory paragraph.

Answer: (C)

The key idea is that modifications to an audit report come in two flavors: changes in wording with the same opinion, and changes in the opinion itself. An explanatory paragraph (emphasis-of-matter or other-matter) can be added to a standard report to highlight a matter that is properly disclosed, and the auditor can still issue an unmodified (unqualified) opinion if the financial statements are fairly presented.

That’s why the statement about always needing to modify an unqualified opinion when an extra paragraph is added isn’t true. Adding explanatory language does not automatically change the opinion; it can accompany an unmodified opinion when the matter is disclosed and does not distort the overall fairness of the statements. For example, if management’s disclosure about going concern is adequate, the auditor may issue an unmodified opinion with an emphasis-of-matter paragraph drawing attention to that disclosure.

The other options describe scenarios that can occur with either modified wording or with an actual modification of the opinion, so they’re not inherently incorrect in the same way.