. The auditors conclude that there is a material inconsistency in the \"other in
ID: 2679630 • Letter: #
Question
. The auditors conclude that there is a material inconsistency in the "other information" in an annual report to shareholders containing audited financial statements. If the auditors conclude that the financial statements do not require revision, but the entity refuses to revise or eliminate the material inconsistency, the auditors mayA. Issue an "except for" qualified opinion on the entity's financial statements, citing a departure from generally accepted accounting principles
B. Consider the matter closed since the other information is not in the audited financial statements
C. Issue an adverse opinion on the entity's financial statements due to inadequate disclosure
D. Revise the report on the entity's financial statements to include a separate explanatory paragraph describing the material inconsistency
Explanation / Answer
Correct Answer: D Explanation: The auditor's responsibility with respect to information in an annual report does not extend beyond the financial information identified in his report. However, he should read the other information and consider whether it is materially inconsistent with information appearing in the financial statements. If he concludes that the other information is inconsistent and the client refuses to correct the inconsistency, the auditor should either revise his report to include an explanatory paragraph describing the material inconsistency, withhold the use of his report in the annual report, or withdraw from the engagement.
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