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.She claims that "confidentiality" prevents the CPA from informing anyone.Which of the following statements is correct?

Question

Quizplus · Accepted Answer

The correct answer is D. The auditor has a responsibility to issue a revised audit report if they discover material misstatements in the financial statements, regardless of the CEO's refusal to correct them. The principle of confidentiality does not prevent the disclosure of the information in this case, as the public interest in accurate financial reporting outweighs any proprietary interest of the client. The auditor should inform the audit committee and the board of directors, and if necessary, consider legal options to force the client to correct the misstatements or withdraw from the engagement.

Several Months After an Unqualified Audit Report Was Issued,the Auditor