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

When an auditor discovers discrepancies between recorded account balances and confirmation replies, what is the best approach?

1. Ignore the discrepancies

2. Report results as misstatements

3. Examine the discrepancies in detail and resolve them

4. Adjust financial statements accordingly

The correct answer is: Examine the discrepancies in detail and resolve them

When an auditor encounters discrepancies between recorded account balances and confirmation replies, the most appropriate approach is to examine the discrepancies in detail and resolve them. This step is critical because the presence of discrepancies indicates potential issues with the accuracy of the financial information being audited. By investigating these discrepancies, the auditor can gather additional evidence that may clarify whether the differences are due to errors, misstatements, or other underlying issues. This thorough examination allows the auditor to determine the nature and extent of the discrepancies, assess their materiality, and take appropriate actions to address them. It is essential for the auditor to understand the reasons behind the discrepancies before drawing any conclusions about the financial statements or making adjustments. Taking this comprehensive approach ensures that the auditor maintains a high level of professional skepticism and due diligence, which is fundamental in the auditing process. Ultimately, resolving discrepancies helps protect the integrity of the financial statements and assures stakeholders of their reliability.