Final answer:
When there is an unresolvable dispute over asset valuation between a client and the CPA firm, the auditors should express their disapproval in their report or, if the situation warrants it, withdraw from the engagement.
Step-by-step explanation:
When there is an unresolvable difference of opinion between the client company and the CPA firm regarding the valuation of an asset in the financial statements, the final decision technically rests with the client's management. However, the auditors have a professional responsibility to ensure that the financial statements provide a true and fair view of the company's financial position. If the auditors disagree with the valuation and believe it leads to a misstatement in the financial statements, they cannot simply revise the financial statements themselves. Instead, they should express their disagreement.
The auditors can choose to issue a modified audit report where they express their disapproval or concern regarding the asset valuation. If the disagreement is significant and they believe the financial statements are materially misstated, the auditors can issue an adverse opinion or a disclaimer of opinion. Arbitration by the Financial Accounting Standards Board (FASB) is not a typical process for resolving such disagreements. If the differences are so fundamental that the auditors cannot conclude their report, they may choose to withdraw from the engagement altogether.
Therefore, the best course of action for auditors when dealing with an unresolvable asset valuation disagreement is to express their disapproval within the audit report or consider withdrawal from the engagement.