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

Which action should an auditor avoid when a material event occurs after the audit report date?

1. Issuing a new audit report without management's consent.

2. Notifying stakeholders about the event.

3. Updating the financial statements if necessary.

4. Informing regulatory authorities of the event.

The correct answer is: Issuing a new audit report without management's consent.

Issuing a new audit report without management's consent is an action that the auditor should avoid because it may violate established protocols and communication expectations between the auditor and the client. In situations where a material event occurs after the audit report date, the auditor typically works closely with management to determine how to address the implications of that event on the financial statements and the audit opinion. The auditor's role involves reviewing and assessing the impact of any significant events on the financial statements and ensuring that management made the necessary disclosures or adjustments. An auditor's new report should only be issued with the explicit consent and collaboration of management. This protects both the integrity of the audit process and the auditor's professional relationship with the client. If an auditor were to issue a new report unilaterally, it could lead to misunderstandings, potential legal ramifications, and a breakdown in communication between the auditor and management. Notifying stakeholders, updating financial statements as necessary, and informing regulatory authorities of the event are all appropriate actions that reflect the auditor's responsibility to maintain transparency and uphold the integrity of the reporting process. Therefore, the correct approach is to engage collaboratively with management to address any material events in accordance with auditing standards.