Question

After completing the audit report of Blair Corporation, but before delivering the audit report to the client, a tornado demolished the main production facility. In this case, what option is available to the auditor other than dual dating the report?

a. Use the original audit report date.

b. Go back to the client's office and extend testing to the date of the tornado, thereby taking responsibility for all events up to the date of the tornado.

c. Report the situation in the management representation letter.

d. Issue a scope limitation.

Answer 1

The auditor can choose to extend testing to the date of the tornado before issuing the audit report, thereby taking responsibility for events up to that point and providing relevant information in the updated audit opinion.

Step-by-step explanation:

When an auditor has completed an audit report but an event occurs after the report date that could materially affect the financial statements, the auditor has several potential options. In the case described, where a tornado has demolished the main production facility of Blair Corporation after the completion of the audit report but before delivering the report, one option available to the auditor other than dual dating the report is to extend testing to the date of the tornado, effectively updating the audit report with the additional events up to the date of the tornado. This would mean revisiting the client's office and performing additional testing to assess the impact of the tornado on the financial statements.

The choice to extend the audit procedures up to the date of the tornado allows the auditor to provide an updated opinion that reflects the current situation of the company. The auditor takes responsibility for the audit up to the date of the tornado, thereby providing more relevant information to the stakeholders of Blair Corporation.