Final answer:
Auditors should inform senior management, consult legal counsel, and potentially report to regulatory authorities when they find a material misstatement that may be due to fraud, but they should not notify the media.
Step-by-step explanation:
If an auditor determines that a material misstatement may be due to fraud, the auditor should take several steps to address this serious issue.
However, one action that is not appropriate for the auditor to take is to notify the media.
Following professional and legal protocols, the auditor should:
- Inform senior management about the finding.
- Consult legal counsel to determine the legal and ethical obligations.
- Report to regulatory authorities if required by law or professional standards.
Notifying the media, however, could potentially harm the client's reputation and the auditor's professional relationship with the client, and it may also violate confidentiality agreements and professional ethics.
If the auditor determines that a material misstatement may be due to fraud, there are several actions they should take. They should inform senior management about their findings, as well as consult legal counsel to determine the appropriate steps to take.
Additionally, they should report the potential fraud to regulatory authorities, such as the Securities and Exchange Commission (SEC) in the case of public companies. However, notifying the media is not a typical action that auditors would take in this situation.