If an auditor had discovered any income or expenditure to be included or excluded in audited financial statements which are already published and such income or expense will have a great effect on the financial statements. Then what the auditor should do?

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Answer

Then, the auditor will inform about the wrong entries to the owner....as it is his duty to do so..The auditor on his behalf will not do any investigation..because he is a watchdog whose duty is to keep an eye on the records and inform to the owner if finds something wrong amd he is not a bloodhound who will find the guilty and punish them. And in this case, it can be any kind of manupulation or fraud also, which is to be investigated. So, he will inform the oener and further the owner will hire an investigator or will allow and give right as well as duty to auditor to do so.

Answer

Auditor is the person .who checks the financial statements ,books and records of company .and he is invited by company to check their statement

Answer

If an auditor discovers any income or expenditure that should have been included or excluded in audited financial statements that have already been published, and if such income or expense has a significant impact on the financial statements, the auditor should take several steps to address the situation. These steps can be divided into the following headings:

1. Identify the Issue
The auditor should first identify the income or expenditure item that was incorrectly included or excluded in the published financial statements. This may involve conducting further investigations, reviewing supporting documentation, and discussing the matter with relevant personnel.

2. Assess the Materiality
The auditor needs to assess the materiality of the identified income or expenditure item. Materiality refers to the significance of an item or event in influencing the economic decisions of users of the financial statements. If the impact of the item is deemed to be material, it means that its inclusion or exclusion could potentially change the assessment or understanding of the financial statements by users.

3. Evaluate the Implications
The auditor should evaluate the implications of including or excluding the income or expenditure item on the financial statements. This involves considering the effect on key financial ratios, the overall presentation of the financial statements, and the potential impact on stakeholders such as investors, creditors, and regulatory bodies.

4. Consult with Management
The auditor should discuss the identified issue with management, highlighting the materiality and potential impact on the financial statements. This discussion should be held in a professional and objective manner, focusing on the facts and implications rather than assigning blame.

5. Determine Corrective Actions
Based on the discussions with management, the auditor should determine the appropriate corrective actions to address the issue. This may involve restating the financial statements, issuing revised financial statements, or making appropriate disclosures in subsequent financial statements. The auditor should also consider whether any internal control weaknesses or deficiencies contributed to the inclusion or exclusion of the item and recommend improvements to prevent similar issues in the future.

6. Communicate Findings
The auditor should communicate the findings to the appropriate stakeholders, including the entity's management, board of directors, and regulatory bodies. This communication should be clear, concise, and transparent, providing a detailed explanation of the issue, the corrective actions taken, and any potential implications on the financial statements.

7. Document the Audit File
Finally, the auditor should document all the steps taken, discussions held, and decisions made in the audit file. This documentation will serve as evidence of the auditor's due diligence, professional judgment, and compliance with auditing standards.

In conclusion, if an auditor discovers any income or expenditure that was incorrectly included or excluded in already published financial statements, the auditor should take appropriate steps to identify, assess, and address the issue. This includes evaluating materiality, consulting with management, determining corrective actions, communicating findings, and documenting the audit file.

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