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:

Frontal Lobes

Portion of the cerebral cortex lying just behind the forehead; involved in speaking and muscle movements and in making plans and judgments.

Endocrine System

The collection of glands that produce hormones which regulate metabolism, growth and development, tissue function, sexual function, reproduction, sleep, and mood.

Hypothalamus

A region of the brain that regulates important functions, including temperature, hunger, thirst, emotional activity, and circadian rhythms.

FMRI

Functional Magnetic Resonance Imaging, a neuroimaging procedure that measures brain activity by detecting changes associated with blood flow.