Several Months After an Unqualified Audit Report Was Issued,the Auditor

question 123

Multiple Choice

Several months after an unqualified audit report was issued,the auditor discovers the financial statements were materially misstated.The client's CEO agrees that there are misstatements,but refuses to correct them.She claims that "confidentiality" prevents the CPA from informing anyone.Which of the following statements is correct?

• A)The CEO is correct and the auditor must maintain confidentiality.
• B)The CEO is incorrect,but since the audit report has been issued,it is too late to correct the report.
• C)The CEO is correct,but to be ethically correct,the auditor should violate the confidentiality rule and disclose the error.
• D)The CEO is incorrect,and the auditor has an obligation to issue a revised audit report,even if the CEO will not correct the financial statements.

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Definitions:

Df

Short for degrees of freedom, it refers to the number of independent values in a calculation that are free to vary.

Mean Square

The average of the squares of the differences between the observed and expected values, used in various statistical methods, such as ANOVA.

Main Effect

In analysis of variance, the direct influence of an independent variable on a dependent variable, discounting interactions with other variables.

Factor A

A variable manipulated or monitored to determine its effects on an outcome in an experiment.