Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

If a subsequent event leads to the adjustment of financial statements, what action should a CPA take regarding their report date?

1. Maintain the original audit report date.

2. Dual date the report to reflect the adjustment.

3. Change the report date to the date of the event.

4. Issue a new report for the adjusted financial statements.

The correct answer is: Dual date the report to reflect the adjustment.

When a CPA is faced with a subsequent event that necessitates an adjustment of the financial statements, the appropriate action is to dual date the report. Dual dating involves dating the audit report with two dates: the original date of the audit report and a second date that corresponds to the date when the subsequent event was evaluated and adjustments were made to the financial statements. This approach is significant because it indicates to users of the financial statements that the auditor has considered events occurring after the original report date but before the issuance of the adjusted financial statements. It provides clarity regarding the scope of the audit as of the original date while acknowledging the additional information that resulted in the adjustments. This dual dating mechanism ensures transparency and informs users that the auditor is aware of the adjustments and has appropriately considered the implications of the subsequent event. Maintaining the original audit report date would not account for the implications of the subsequent event, potentially misleading users regarding the relevance and timing of the significant information. Changing the report date to the date of the event could imply that the audit work was also performed at that later date, which can misrepresent the audit's timing and the auditor's perspective at the original report date. Issuing a new report could be excessive unless the adjustments were substantial enough to warrant the