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

If an auditor learns of a material receivable related to a sale occurring after the audit report date, what action is most likely necessary?

1. Revise the financial statements to adjust the receivable.

2. Require a note disclosure to the financial statements.

3. Issue an emphasis of matter in the audit report.

4. Delay the issuance of the audit report until resolved.

The correct answer is: Require a note disclosure to the financial statements.

When an auditor becomes aware of a material receivable related to a sale that occurs after the audit report date, the most appropriate action is to require a note disclosure to the financial statements. This is because the sale and its related receivable reflect events that occurred after the reporting period but before the issuance of the audit report. According to auditing standards, it is essential for the financial statements to present a fair view of the company's financial condition, including events that may significantly affect users' understanding of the financial statements. A note disclosure would provide detailed information about the nature and potential impact of this post-reporting period event, ensuring that users, including investors and creditors, are adequately informed. While revising the financial statements or delaying the issuance of the audit report might seem advantageous in addressing new information, these actions are typically not warranted for events that occur after the audit report date unless they indicate conditions that existed before that date. An emphasis of matter in the audit report could also be considered, but a disclosure note is generally sufficient for most material subsequent events, as it allows for clarity without altering the overall audit assertions. Therefore, requiring a note disclosure is the method most aligned with standard auditing practices in this context.