Wallis & Co

Multiple Choice

Wallis & Co. has just been audited and the auditor has found that management have understated provisions for potential losses when valuing work in progress for the current year. The error is material to the financial statements but not pervasive and the directors have refused to correct it. What action should the auditor take?

A) The auditor should issue an unmodified audit report with an Emphasis of Matter Paragraph.
B) The auditor should issue a modified audit report with an adverse audit opinion.
C) The auditor should issue a modified audit report with an 'except for' paragraph.
D) The auditor should immediately resign and inform the shareholders.