Question: Your audit client, a military contractor, received a government grant to develop a new submarine. The grant was awarded after year end, but prior to the financial statements being approved. Considerable research costs, fro a range of different submarine designs, had been incurred by the client. The client has capitalized these research costs at year end on the basis that the government grant was received. Which type of audit report will you issue?

a. Unqualified

b. Unqualified with Emphasis of Matter

c. Qualified

d. Adverse

The answer is qualified opinion. However, I think it should be adverse opinion because capitalized an expense that should be expensed will affect two accounts (asset account and expense account). This action is material and impacts two accounts, therefore the opinion should be adverse. I'm confused why the answer is qualified opinion