Final answer:
The auditor should not presume that a material misstatement occurred in the financial statements (option b) when a material weakness is identified. They should instead consider the implications of the weakness and perform additional procedures to determine if a material misstatement has occurred.
Step-by-step explanation:
When a material weakness in internal control over financial reporting is identified by an auditor, the appropriate response is not to automatically presume that a material misstatement exists in the financial statements. Instead, the auditor should understand the potential implications of the weakness and its possible effect on the financial statements. Material weaknesses represent significant deficiencies that could lead to material misstatements if not prevented or detected on a timely basis. However, this does not equate to the certainty of a material misstatement occurring.
The auditor's approach should include consideration of the identified weakness while performing additional audit procedures tailored to assess whether a material misstatement has indeed occurred due to that weakness. It would be inappropriate to request the internal audit function conduct a full review of the control issue as the solution since this task falls within the auditor's responsibilities. Issuing an unmodified opinion without addressing the potential implications of the material weakness on the financial statements would also not be a correct course of action. Therefore, the correct answer is: B) Not presume that a material misstatement occurred in the financial statements.