AUD 1 - Other Information and Supplementary Information

Question 1

Is other information (financial ratios, capital expenditures) the auditor’s responsibility?

Answer 1

Auditor is NOT responsible for other information, ONLY responsible to read other information because the credibility of the financial statements may be undermined

Question 2

What to do if financial statements require revision due to material inconsistency (other information shows revenue of $20,000,000 and financial statement shows revenue for $5,000,000) and management refuses to make the revision?

Answer 2

The auditor should modify the audit opinion

OR

withdraw

Question 3

What to do if other information require revision due to material inconsistency (other information shows revenue of $20,000,000 and financial statement shows revenue for $5,000,000) and management refuses to make the revision?

Answer 3

1) Include an other-matter paragraph (nonissuer) or explanatory paragraph (issuer)
2) Withhold the use of the report
3) Withdraw from the engagement

Question 4

What are the two objectives of reporting on supplementary information?

Answer 4

1) To evaluate the presentation of the supplementary information in relation to the financial statements as a whole
2) To report whether the supplementary information is fairly stated, in all material respects to the financial statements as a whole

Question 5

What five conditions must be met for reporting on supplementary information?

Answer 5

1) Supplementary information is derived from FS as a whole
2) Supplementary information relates to the same period
3) Financial statements were audited and the auditor issued an auditor’s report
4) Financial statements cannot have an adverse opinion or disclaimer of opinion
5) Supplementary information will accompany the audited financial statements

Question 6

How do you report supplementary reporting for nonissuers?

Answer 6

Auditors can use an other-matter paragraph and give an opinion on the supplementary information

OR

Do a separate report for supplementary information

Question 7

What to do if supplementary information is materially misstated and management refuses to revise?

Answer 7

1) Modify the opinion on the supplementary information (qualified or adverse) and describe the misstatement
2) If a separate report is being issued, withhold the report

Question 8

What to do if financial statements have a qualified opinion as it relates to supplementary information? What to do if financial statements have a disclaimer of opinion or adverse opinion as it relates to supplementary information?

BOTH ISSUER AND NONISSUER

Answer 8

1) Qualified opinion on financial statements = qualified opinion on supplementary information
2) Adverse opinion or disclaimer of opinion on financial statements = adverse opinion or disclaimer of opinion on financial statement

Question 9

How do you report supplementary reporting for issuers?

Answer 9

Auditors can use an explanatory paragraph and give an opinion on the supplementary information

OR

Do a separate report for supplementary information