Question

What is an auditor's responsibility with regard to subsequently discovered facts?

1) Subsequently discovered facts become known only after the report release date so auditors have no responsibility to deal with them.
2) Auditors are only responsible for subsequently discovered facts that become known before the end of fieldwork date.
3) Auditors are responsible for subsequently discovered facts, both before and after the report release date.
4) Auditors have no responsibility for subsequently discovered facts after the report release date unless the client determines that routine auditing procedures should have uncovered the facts during the period of the financial statement.

Answer 1

The correct option is 2, Auditors are only responsible for subsequently discovered facts that become known before the end of fieldwork date.

Step-by-step explanation:

An auditor's responsibility regarding subsequently discovered facts relates to information that comes to light after the financial statements have been issued and the auditor's report has been released. This subject specifically pertains to the guidelines and professional standards established by auditing bodies such as the AICPA in the United States.

Option 3 is correct: Auditors are responsible for subsequently discovered facts, both before and after the report release date. If such facts may affect the financial statements on which an auditor has already issued a report, they have specific responsibilities, including determining whether the financial statements need revision and, if so, ensuring that the entity informs users about the situation and the revisions of the financial statements.

When an auditor learns of a subsequently discovered fact after the report release date that, had it been known at that time, may have affected the auditor's report, they should discuss the matter with management, ensure that the entity informs stakeholders, and take appropriate action based on the nature of the facts. This responsibility highlights the ongoing commitment of auditors to the integrity and reliability of financial reporting.