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

question 18

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:

Sensitivity

The degree to which a system's output depends on the input or how changes in input can affect the output in modeling and analysis.

Subjectivity

Subjectivity pertains to how someone's judgment is shaped by personal opinions and feelings instead of external facts or evidence.

Centre-of-Gravity

A method in location analysis that finds the best location for a facility based on minimizing transportation costs, taking into account the geographical distribution of supply and demand.

Tonnes

A metric unit of mass equal to 1,000 kilograms or approximately 2,204.6 pounds.