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

What should an auditor do if other information contradicts the audited financial statements?

1. A. Ignore the contradiction

2. B. Issue a qualified opinion

3. C. Add a paragraph addressing the inconsistency in the report

4. D. Notify shareholders of the discrepancy

The correct answer is: C. Add a paragraph addressing the inconsistency in the report

When an auditor encounters other information that contradicts the audited financial statements, the most appropriate course of action is to add a paragraph addressing the inconsistency in the report. This approach ensures transparency and provides clarity to the users of the financial statements regarding the conflict between the financial statements being audited and the conflicting information. By including an additional paragraph in the audit report, the auditor informs stakeholders of the discrepancy and can outline the nature of the inconsistency, which is crucial for users to understand the context and implications. This also upholds the auditor's responsibility for public trust and the integrity of the audit process while maintaining professional standards. Other options, such as ignoring the contradiction or merely issuing a qualified opinion, would fail to adequately communicate the issue to stakeholders and compromise the auditor's role in providing reliable and accurate financial reporting. Notifying shareholders alone might not convey the necessary details and context that a properly structured paragraph in the audit report would provide.