Audit and Assurance Practice Exam

What protocol does SOX require if an important audit procedure is later found to be unperformed?

1. Notify management only.

2. File a Form 8-K with the SEC.

3. Ignore the omission if no issues arose.

4. Resend the original audit report with clarification.

The correct answer is: File a Form 8-K with the SEC.

The requirement for filing a Form 8-K with the SEC stems from the Sarbanes-Oxley Act (SOX), which places a strong emphasis on the accuracy and transparency of financial reporting. If an important audit procedure is identified as having been unperformed, this could significantly affect the reliability of the financial statements. Therefore, the law mandates that the situation must be reported to the SEC through a filing of Form 8-K. This form is specifically designed to ensure that shareholders and potential investors are promptly informed of events that may have a substantial impact on the company's financial status or operations. In this context, simply notifying management is inadequate, as it does not ensure that all relevant stakeholders are aware of the implications of the unperformed procedure. Ignoring the omission could mislead investors and other parties relying on the information, potentially leading to further legal and regulatory repercussions. Additionally, resending the original audit report with clarification does not fulfill the requirement for formal disclosure mandated by SOX, which seeks to maintain high standards for corporate governance and accountability. Thus, filing Form 8-K aligns with the regulatory expectation of transparency and protection for investors, reinforcing the importance of addressing deficiencies in audit compliance proactively.