What should the auditor be able to explain regarding an issue found during the audit?

The auditor should be able to explain the issue and its significance to the audited entity's stakeholders because this is fundamental to the audit's purpose. An audit is designed to provide assurance regarding the accuracy and reliability of financial statements, compliance with laws, and operational efficiency. Understanding the significance of the issue helps stakeholders recognize potential risks or impacts on financial reporting, compliance, and overall business operations.

Communicating the importance of the issue ensures that stakeholders, including management and board members, can make informed decisions based on the findings. This includes not only the nature of the issue but also its potential implications for the entity’s financial health, regulatory position, and strategic direction. The focus on stakeholder significance captures the essence of what audit findings aim to achieve—enhancing transparency and accountability within the organization.

Other options, while they touch on elements of the audit process, do not directly address the critical need to convey the relevance and implications of the findings to those who are impacted by them.