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A "qualified opinion" under SA 705 is issued when:
AFS are free from material misstatement
BMisstatements are material BUT NOT pervasive, OR scope limitation is material but not pervasive
CMisstatements are pervasive
DAudit is incomplete
Answer & Solution
Correct answer: C. Misstatements are pervasive
1. SA 705.7-8: material + not pervasive → qualified.
2. Material + pervasive → adverse (misstatement) or disclaimer (scope limitation).
3. Pervasiveness is judged in terms of effect: not confined, large proportion, or fundamental to user understanding.
_Source: ICAI BoS CA Final Paper 3, Ch 6 "Standards on Auditing and Professional Ethics"_
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