After an Audit Report Containing an Unqualified Opinion on a Nonpublic

question 75

Multiple Choice

After an audit report containing an unqualified opinion on a nonpublic client's financial statements is issued,the auditor learns that the client has decided to sell the shares of a subsidiary that accounts for 30 percent of its revenue and 25 percent of its net income.The auditor should

• A) Determine whether the information is reliable and, if it is determined to be reliable, request that revised financial statements be issued.
• B) Notify the entity that the auditor's report may no longer be associated with the financial statements.
• C) Describe the effects of this subsequently discovered information in communications with persons known to be relying on the financial statements.
• D) Take no action because the auditor has no obligation to make any further inquiries.

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Definitions:

Consultative Leaders

Leaders who tend to delegate authority and confer with others in making decisions, but who makes the actual decisions independently.

Conformity

The act of matching attitudes, beliefs, and behaviors to group norms, policies, or societal expectations.

Creativity

Creativity is the ability to produce original, diverse, and valuable ideas or solutions.

Groupthink

A psychological phenomenon that occurs within a group of people in which the desire for harmony or conformity results in an irrational or dysfunctional decision-making outcome.