procedures that were applied may tend to compensate for the one omitted or make its omission
less important. Choice "a" is incorrect. If a procedure has been omitted, the auditor must
consider whether other parties may be relying on the financial statements, even if the audit
report had limited distribution. Choice "b" is incorrect. The fact that the previous opinion was
qualified does not negate the need to apply the omitted procedure. Choice "d" is incorrect.
Delays by client personnel may extend audit work, but do not provide a reason for omitting a
procedure.
QUESTION: 91
Subsequent to the issuance of an auditor's report, the auditor became aware of facts existing at
the report date that would have affected the report had the auditor then been aware of such
facts. After determining that the information is reliable, the auditor should next:

A. Determine whether there are persons relying or likely to rely on the financial statements who
would attach importance to the information.
B. Request that management disclose the newly discovered information by issuing revised
financial statements.
C. Issue revised pro forma financial statements taking into consideration the newly discovered
information.
D. Give public notice that the auditor is no longer associated with financial statements.

Answer(s): A
Explanation:
Choice "a" is correct. When subsequently discovered information is found both to be reliable
and to have existed at the date of the auditor's report, the auditor should determine whether
there are persons relying or likely to rely on the financial statements who would attach
importance to the information. Choice "b" is incorrect. The auditor would request that
management disclose the newly discovered information only after determining whether there
are persons relying on the information. Choice "c" is incorrect. Management, not the auditor,
may issue revised financial statements. Choice "d" is incorrect. The auditor would give public
notice that he/she is no longer associated with the FS only after determining that there are
persons relying on the information and only if the client refuses to issue revised FS.
QUESTION: 92
On March 15, X4, Kent, CPA, issued an unqualified opinion on a client's audited financial
statements for the year ended December 31, X3. On May 4, X4, Kent's internal inspection
program disclosed that engagement personnel failed to observe the client's physical inventory.
Omission of this procedure impairs Kent's present ability to support the unqualified opinion. If
the stockholders are currently relying on the opinion, Kent should first:

A. Advise management to disclose to the stockholders that Kent's unqualified opinion should not
be relied on.
B. Undertake to apply alternative procedures that would provide a satisfactory basis for the
unqualified opinion.
C. Reissue the auditor's report and add an explanatory paragraph describing the departure from
generally accepted auditing standards.
D. Compensate for the omitted procedure by performing tests of controls to reduce audit risk to
a sufficiently low level.
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