An auditor concludes that there is a material inconsistency in the other information in an annual report to shareholders containing audited financial statements. If the auditor concludes that the financial statements do not require revision, but the entity refuses to revise or eliminate the material inconsistency, the auditor may:
A)issue an "except for" qualified opinion after discussing the matter with the entity's board of directors.
B)consider the matter closed since the other information is not in the audited financial statements.
C)disclaim an opinion on the financial statements after explaining the material inconsistency in a separate explanatory/emphasis-of-matter paragraph.
D)revise the auditor's report to include a separate explanatory (or other matter)paragraph describing the material inconsistency.

Question

Quizplus · Accepted Answer

The auditor can include a separate explanatory (or other matter) paragraph in the auditor's report to describe the material inconsistency when the financial statements themselves do not require revision but there is a refusal to correct the inconsistency in the other information. This action communicates the issue to the users of the financial statements without qualifying the opinion on the financial statements themselves, as the inconsistency is not within the financial statements but in the other information provided in the annual report.

An Auditor Concludes That There Is a Material Inconsistency in the Other