Good question....Unless a listing agent either has a cancellation of the listing from the seller or proof that the seller is no longer in possession of the home, then the listing contract is still active.
When a home had a date to go to auction, there are many circumstances where the sale is delayed, or canceled. In addtion, when it is sold at auction, there is a delay in the recording of that information. So the listing agent is not incorrect in assuming that until they have notification, then their listing contract is still valid.
I have been known to attend the scheduled auction and see for myself what happens; if it is sold (typically meaning 'sold' back to its lender in this market, rather than an outside party), or the sale is postponed. I do that for the piece of mind of my seller.
In addition, I have written an article on how Obama's stimulus package wil affect Real Estate. One of the ways is that banks will delay foreclosures now in the hopes of working out a refinancing, or loan modification. It is bad PR for the lenders to foreclose on more homes, no matter how justified it may be. And the banks are preferring the short sale option rather than foreclosure even as the scheduled sale date looms closer. So for those reasons, I think the listing agent is justified, without proper notice of cancellation of the listing, to have it remain on the market.
This topic should provide some interesting discussion.