This preview shows page 1. Sign up to view the full content.
Unformatted text preview: as a result of the deteriorating financial
condition of the entity's principal customer that led to the customer's bankruptcy. Management then
refused to adjust the financial statements for this subsequent event. The CPA determined that the
information is reliable and that there are creditors currently relying on the financial statements. The
CPA's next course of action most likely would be to:
a. Notify the entity's creditors that the financial statements and the related auditor's report should no
longer be relied on.
b. Notify each member of the entity's board of directors about management's refusal to adjust the
c. Issue revised financial statements and distribute them to each creditor known to be relying on the
d. Issue a revised auditor's report and distribute it to each creditor known to be relying on the financial
Choice "b" is correct. Since the material loss affects the audit report and there are creditors relying on the
View Full Document
- Fall '12