Disclaimers Discuss what a disclaimer is, when it is issued, and how it would affect the format of a standard three paragraph audit report

A disclaimer may be issued for a pervasive scope limitation or for lack of independence of the practitioner. A disclaimer basically says that the practitioner performed no procedures and provides no assurances on the financial statements. In some cases, a disclaimer will be issued when there is substantial doubt about the client being a going concern.
When the CPA is not independent of the client, professional standards forbid any expression of assurance by the auditor on the financial statements. Lack of independence results in a one paragraph disclaimer stating that the practitioner is not independent with respect to the client and did not audit the financial statements and does not express any opinion on the financial statements.
Scope limitations result from the inability to gather sufficient evidence to express an opinion and may result from the client's actions or the situation. When imposed by the client or when the client has a pervasive scope limitation, such as the practitioner not being able to observe ending inventory because of when the engagement started, then the practitioner normally issues a disclaimer. If the scope limitation is not imposed by the client and is limited then the practitioner usually expresses a qualified opinion.
The effect on the standard three-paragraph audit report is to change the wording of the introductory paragraph, eliminate the scope paragraph, add an explanatory paragraph discussing the scope limitation and its approximate effects, followed by a disclaimer paragraph stating that the practitioner was not able to perform sufficient work and so does not express an opinion on the financial statements.