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

question 85

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. The CEO 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:

Basic Principle

A fundamental idea or rule that serves as the foundation for a system of belief or behavior or for a chain of reasoning.

Equality/Inequality

Equality refers to the state of being equal, especially in status, rights, and opportunities, while inequality denotes the existence of unequal opportunities and disparities.

Ethnographic Study

A qualitative research method focused on the systematic study of people and cultures, often through observation and interviews, to understand social practices and phenomena.

Margaret Mead

An influential American cultural anthropologist who contributed significantly to the field through her studies of the socialization processes in Pacific Island cultures.