Final answer:
The correct course of action when a material error is found in prior financial statements is to correct the error and restate the affected financial statements for accuracy and transparency. Consulting a financial expert is also recommended to ensure compliance with accounting standards.
Step-by-step explanation:
When a material error is discovered in prior financial statements, the appropriate course of action is to correct the error and restate the prior financial statements. This is to ensure that the financial statements present a true and fair view of the company's financial performance and position. Continuation with the current financial statements without correction, waiting for the next financial year to correct, or ignoring the error entirely would be incorrect and could mislead stakeholders. It is also advisable to consult with a financial expert to ensure the restatement process is conducted according to the applicable accounting standards and regulations.