Question

The private pharmaceutical Proforma Company is dependent on one recently developed drug for much of its current revenue. A new scientific study has identified previously unknown and dangerous side effects of the drug, and industry observers expect a court challenge to the drug's legal status. Proforma refuses to properly disclose a going concern issue in the notes as required. An auditor should do which of the following?

1) Report concerns to the independent audit committee of the board of directors
2) None of these answer choices are correct.
3) Withdraw from the engagement
4) Modify the opinion

Answer 1

An auditor should report concerns to the independent audit committee of the board of directors.

Step-by-step explanation:

An auditor should report concerns to the independent audit committee of the board of directors when a private pharmaceutical company refuses to properly disclose a going concern issue in the notes. This is the appropriate course of action as it ensures that the concerns are brought to the attention of the company's governing body and can be addressed appropriately. It is important for auditors to fulfill their responsibility of reporting any potential issues or concerns to the relevant authorities.