Final answer:
The first step Ascent must take after discovering a material misstatement due to fraud is to determine whether the financial statements need to be revised, as prescribed by AU-C 560.
Step-by-step explanation:
When Ascent, as the auditor, is made aware of a material misstatement due to fraud in the December 31, 2022 financial statements of Canton Inc., the first step according to AU-C 560 is to determine whether the financial statements need to be revised. This standard guides the auditor's responsibilities relating to subsequent events between the date of the financial statements and the date of the auditor's report, as well as the actions to take when an event occurs after the auditor's report has been issued.
The auditor needs to evaluate the implications of the identified misstatement. If it is material, a revision of the financial statements might be necessary. The subsequent steps would involve discussing the matter with the appropriate level of management and, if appropriate, those charged with governance, and then, if the financial statements are revised, perform audit procedures on the changes made. If the report's date is after the identification of the misstatement, the auditor should consider the need to dual date the report or amend the report's date.