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

In case of a material inconsistency found in a client's letter of transmittal, which action should the auditor take?

1. Request a client representation letter acknowledging the inconsistency.

2. Include an other-matter paragraph in the auditor's report.

3. Request that the client revise the letter of transmittal.

4. Consider withdrawing from the engagement.

The correct answer is: Request that the client revise the letter of transmittal.

When an auditor identifies a material inconsistency in a client's letter of transmittal, the appropriate course of action is to request that the client revise the letter of transmittal. This is necessary because the letter of transmittal is an important document that conveys essential information about the financial statements and the audit itself. A material inconsistency could mislead users of the financial statements regarding the reliability of the audit or the financial information presented. By asking the client to revise the letter, the auditor ensures that the communication accurately reflects the audit's findings and conclusions. This action helps to establish a correct and clear understanding between the auditor and the client and ensures that all stakeholders have access to coherent information. The other options involve actions that may not directly resolve the inconsistency or would not be the most effective first step to address the issue. For instance, requesting a client representation letter acknowledges the inconsistency but does not rectify the situation. Including an other-matter paragraph in the auditor's report may inform users of an inconsistency but doesn't resolve it in the documentation. Considering withdrawal from the engagement is an extreme measure and would typically be reserved for situations where the integrity of the audit could not be maintained. Thus, requesting a revision is the most direct and effective response to