Question

While preparing this year's tax return you discover last year's return has a $1,000,000 error. If the client refuses to correct the mistake must you resign from the engagement?

Answer 1

The resignation of an auditor can be a critical and highly exposed event with serious implications for the company and the auditors themselves. Resignation, particularly in debatable circumstances, can expose auditors to various risks, including the risk of litigation from regulatories if court or law has found auditor involvement in a fraud. The amount $1,000,000 error last year should be checked with clients overall turnover, how much percentage it is if within the permissable limit auditor should not have resign from the auditor must obtain from the written confirmation from the client as to why they wont rectify the mistake. BUT HERE $1M looks like a big number so if the client doesnt rectify the mistake then either withdraw from the audit if its a delibrate action like a fraud and report to the regulators. if its a mistake by client then then must obtain a written reoresentation from the client and also consult with legel expert if required before making a decision