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

How should the auditor report when management refuses to revise inconsistent information?

1. A. Waive the inconsistency in the report

2. B. Seek legal counsel and withdraw from the engagement

3. C. Communicate the matter to those charged with governance

4. D. Issue an adverse opinion

The correct answer is: C. Communicate the matter to those charged with governance

When management refuses to revise inconsistent information, the auditor should communicate the matter to those charged with governance. This is vital because those charged with governance, such as the board of directors or audit committee, have a responsibility to oversee the financial reporting process and may be unaware of the issues arising from the inconsistent information. Communication with those in governance ensures that they are informed of any significant disagreements or unresolved matters with management. This dialog fosters transparency and allows governance to take corrective measures if necessary. Effective governance can address potential misstatements before the financial statements are finalized, and also ensure that the integrity of the reporting process is maintained. While other options may appear viable in different contexts, communicating with governance is typically the most appropriate action regarding inconsistencies that management is unwilling to amend. This action aligns with the auditor's responsibility to enhance accountability in the financial reporting process, thereby supporting the overall integrity of the audit.