Other information along with financial statements

Question 1

What is meant by the term “inconsistency” in connection with other information?

Answer 1

Other information that conflicts with information contained in audited financial statements

Question 2

What is meant by the term “misstatement of fact” in connection with other information?

Answer 2

Other information that is unrelated to matters appearing in audited financial statements that is incorrectly presented

Question 3

If management is unwilling to make changes to correct material inconsistencies identified prior to the report release date, how should the auditor’s report address the issue?

Answer 3

The auditor should include an other-matter paragraph to the auditor’s report. (Other possibilities would be to withhold the auditor’s report or withdraw from the engagement.)

Question 4

What should the auditor do when a material misstatement of fact has been identified?

Answer 4

The auditor should discuss the matter with management. If a material misstatement of fact is found to exist, the auditor should request management to consult with a qualified third party (such as the entity’s legal counsel) to address the issue.

Question 5

What is meant by the term “other information”?

Answer 5

Information other than the financial statements and the auditor’s report that is included in a document containing audited financial statements and the auditor’s report (can be financial and nonfinancial information but excludes “required supplementary information”)

Question 6

Identify a few examples of “other information.”

Answer 6

Financial summaries or highlights, management reports on operations, employment data, financial ratios, and selected quarterly data, etc. (“Other information” does not include press releases, information in analyst briefings, or information posted to the entity’s Web site.)