On February 25, a CPA Issued an Auditor's Report Expressing

question 24

Multiple Choice

On February 25, a CPA issued an auditor's report expressing an unqualified opinion on financial statements for the year ended January 31. On March 2, the CPA learned that, on February 11, the entity incurred a material loss on an uncollectible trade receivable as a result of the ongoing deterioration of the financial condition of the entity's principal customer, which finally led to the customer's bankruptcy. Management then refused to adjust the financial statements for this subsequent event. The CPA determined that the information is reliable and that there are creditors currently relying on the financial statements. The CPA's next course of action most likely would be to:

• A)notify the entity's creditors that the financial statements and the related auditor's report should no longer be relied upon.
• B)notify each member of the entity's board of directors about management's refusal to adjust the financial statements.
• C)issue revised financial statements and distribute them to each creditor known to be relying on the financial statements.
• D)issue a revised auditor's report and distribute it to each creditor known to be relying on the financial statements.

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Definitions:

Risk-Free Rate

The theoretical return on investment with no risk of financial loss, often represented by the yield on government bonds.

Preferred Stock

A type of stock that grants holders preference in dividend payments and assets in the event of a liquidation, often without voting rights.

Common Stock

A type of equity security that represents ownership in a corporation, giving holders voting rights and a share in the company's profits via dividends.

Market Value

The prevailing rate at which a service or asset is available for purchase or sale in a market.