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/emphasis-of- matter paragraph describing the material inconsistency.

Question

Quizplus · Accepted Answer

If an auditor concludes that there is a material inconsistency in the other information in an annual report to shareholders containing audited financial statements, and the entity refuses to revise or eliminate it, the auditor should revise the auditor's report to include a separate explanatory/emphasis-of-matter paragraph describing the material inconsistency. This approach complies with the requirements of professional standards and ensures that the users of the financial statements are adequately informed about the material inconsistency in the other information. The other options (A, B, and C) are not appropriate because they do not address the material inconsistency in the other information or do not comply with the requirements of professional standards.

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