Management Believes, and the Auditor Is Satisfied, That a Material

Multiple Choice

Management believes, and the auditor is satisfied, that a material loss probably will occur when pending litigation is resolved. Management is unable to make a reasonable estimate of the amount or range of the potential loss, but fully discloses the situation in the notes to the financial statements. If the auditor wishes to call attention to the matter and management does not make an accrual in the financial statements, the auditor should issue a(n) :

A) qualified report due to a scope limitation.
B) qualified report due to a departure from GAAP.
C) unqualified report with an explanatory paragraph.
D) standard unmodified auditor's report.