An auditor reads the letter of transmittal accompanying a county's comprehensive annual financial report and identifies a material inconsistency with the financial statements. The auditor determines that the financial statements do not require revision. Which of the following actions should the auditor take?

Question

Quizplus · Accepted Answer

Choice "A" is correct. When information accompanies audited financial statements in a client-prepared document, the auditor is required to read the information. If such information is materially inconsistent with the financial statements and the financial statements do not require revision, the auditor should request that the information (in this case the letter of transmittal) be revised. Choice "B" is incorrect. The auditor would only revise the report to include discussion of the material inconsistency if the client were unwilling to revise the transmittal letter appropriately. Choice "C" is incorrect. The auditor would only consider withdrawing from the engagement if the client were unwilling to revise the transmittal letter appropriately. Choice "D" is incorrect. The auditor would not request a client representation letter acknowledging the inconsistency, as correction (and not simply acknowledgment) of the error is desired.

An Auditor Reads the Letter of Transmittal Accompanying a County's