On July 27, 20X0, Arthur Ward, CPA, issued an unqualified audit report on the financial statements of Dexter Company for the year ended June 30, 20X0. Two weeks later, Dexter Company mailed annual reports, including the June 30 financial statements and Ward’s audit report, to 150 stockholders and to several creditors of Dexter Company. Dexter Company’s stock is not actively traded on national exchanges or over the counter.
On September 5, the controller of Dexter Company informed Ward that an account payable for consulting services in the amount of $170,000 had inadvertently been omitted from Dexter’s June 30 balance sheet. As a consequence, net income for the year ended June 30 was overstated by $90,500, net of applicable federal and state income taxes. Both Ward and Dexter’s controller agreed that the misstatement was material to Dexter’s financial position at June 30, 20X0, and operating results for the year then ended. What should Arthur Ward’s course of action be in this matter? Discuss.