Question

If a difference between auditor expectations and actual results in a financial statement audit test cannot be explained, even after performing other audit procedures, which of the following is likely to be the most appropriate initial auditor response?

a. Issue an adverse opinion
b. Perform additional audit procedures
c. Change the materiality threshold
d. Accept the difference without further investigation

Answer 1

The appropriate initial response when an auditor finds unexplained discrepancies in a financial statement audit is to perform additional audit procedures to investigate the differences more thoroughly.

Step-by-step explanation:

If a difference between auditor expectations and actual results in a financial statement audit test cannot be explained, even after performing other audit procedures, the most appropriate initial auditor response is likely to be to perform additional audit procedures. This involves looking more deeply into the discrepancies to try to understand the reasons behind them. Only after these extensive procedures fail to clarify the differences would the auditor consider escalating the response, which might include changing the approach, discussing with management, or reassessing the risk of material misstatement. Issuing an adverse opinion, changing the materiality threshold, or accepting the difference without further investigation are generally not the first steps an auditor would take.