What does a service auditor do when issuing a modified opinion?

When a service auditor issues a modified opinion, providing a detailed explanation in a separate paragraph is essential to ensure clarity and transparency. A modified opinion occurs when the auditor identifies certain issues or limitations during the audit that lead them to conclude that the financial statements do not present a true and fair view or may be materially misstated.

By detailing the reasons for the modification, the auditor allows stakeholders, such as clients, management, or third parties, to understand the nature and implications of the findings. This detailed explanation addresses the specific areas of concern, such as compliance issues, limitations in the scope of the audit, or disagreements with management. This approach not only strengthens the credibility of the audit but also provides actionable insights for the organization to address any identified issues.

Options that suggest adding disclaimers, omitting modifications, or focusing solely on favorable outcomes would not provide the necessary depth of information and could mislead stakeholders about the financial health or operational effectiveness of the service being audited. Transparency is crucial in audit reporting, and a thorough explanation serves to uphold the integrity of the audit process.