Question

If an auditor discovers material misstatements after the audit report is issued, the auditor's first step should be to notify:

A) The audit firm's legal council

B) The audit committee of the client

C) The client

Answer 1

If an auditor discovers material misstatements after the audit report is issued, the auditor's first step should be to notify:

The correct answer is Option C - The client. The auditor , subsequent to the discovery of a material misstatement after the audit report being issued, should notify "The client" and its management at whatever level he deems appropriate and investigate on the reliability and genuiness of the information.

Option A is incorrect. The audit firm's legal council is incorrect as auditor is not required to first report to the firm's legal council.

Option B is incorrect. The audit committee of the client is not the correct answer. The audtior will reach out to any appropriate level at the client, including the board of directors, and request their co-operation in investigating the reasons for the material misstatement.

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