Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

What is the consequence of a fact that existed at the report date that the auditor was unaware of prior to the report issuance?

1. The auditor should issue a new audit report.

2. The auditor must evaluate the impact on the original financial statements.

3. No action is required if the auditor is not notified by management.

4. The auditor should only inform the board of directors.

The correct answer is: The auditor must evaluate the impact on the original financial statements.

The correct understanding centers on the responsibility of the auditor regarding events that occur after the report date but before the issuance of the audit report. If an auditor becomes aware of a fact that existed at the report date and which was not previously known, the auditor must evaluate its impact on the financial statements. This assessment is crucial because it helps determine whether the financial statements are still presented fairly in accordance with the applicable financial reporting framework. In practice, this means the auditor should consider whether the previously unrecognized fact leads to significant changes in the financial statements or whether it would affect the opinion expressed in the audit report. If the impact is material, the original financial statements may need to be revised or supplemented with additional disclosures, and a new audit report might be necessary to reflect these changes. While other options suggest various actions, they do not encompass the complete responsibility of the auditor to assess the implications of the newly discovered fact on the financial statements, which is a crucial component of maintaining the integrity of the auditing process.