Other Information Along with Financial Statements Flashcards
An auditor concludes that there is a material inconsistency in the other information in an annual report to shareholders containing audited financial statements. The auditor believes that the financial statements do not require revision, but the client is unwilling to revise or eliminate the material inconsistency in the other information. Under these circumstances, what action would the auditor most likely take?
Consider the situation closed because the other information is not in the audited financial statements.
Issue a qualified opinion after discussing the matter with the client’s audit committee.
Disclaim an opinion on the financial statements after explaining the material inconsistency in a separate emphasis-of-matter paragraph.
Revise the auditor’s report to include a separate paragraph describing the material inconsistency.
Revise the auditor’s report to include a separate paragraph describing the material inconsistency.
This answer is correct because in such a situation the auditor should consider revising the audit report to include a paragraph, withholding use of the report, or withdrawing from the engagement.
An auditor reads the letter of transmittal accompanying a county’s comprehensive annual financial report and identifies a material inconsistency with the financial statements. The auditor determines that the financial statements do not require revision. Which of the following actions should the auditor take?
Request that the client revise the letter of transmittal.
Include an emphasis-of-matter paragraph in the auditor’s report.
Consider withdrawing from the engagement.
Request a client representation letter acknowledging the inconsistency.
Request that the client revise the letter of transmittal.
This answer is correct because the auditor’s first effort should be to request that the client revise the letter.
An auditor concludes that there is a material inconsistency in the other information in an annual report to shareholders containing audited financial statements. If the auditor concludes that the financial statements do not require revision, but the client refuses to revise or eliminate the material inconsistency, the auditor may
Revise the auditor’s report to include a separate other matter paragraph describing the material inconsistency.
Issue an “except for” qualified opinion after discussing the matter with the client’s board of directors.
Consider the matter closed since the other information is not in the audited financial statements.
Disclaim an opinion on the financial statements after explaining the material inconsistency in a separate basis for disclaimer paragraph.
Revise the auditor’s report to include a separate other matter paragraph describing the material inconsistency.
AU-C 720 states that if a material inconsistency exists and the client refuses to revise the other information, the auditor should include an other matter paragraph that explains the inconsistency. The auditor may also withhold the use of the audit report or the auditor may withdraw from the engagement.
When audited financial statements are presented in a client’s document containing other information, the auditor should
Perform inquiry and analytical procedures to ascertain whether the other information is reasonable.
Add an emphasis-of-matter paragraph to the auditor’s report without changing the opinion on the financial statements.
Perform the appropriate substantive auditing procedures to corroborate the other information.
Read the other information to determine that it is consistent with the audited financial statements.
Read the other information to determine that it is consistent with the audited financial statements.
The auditor is required to read the other information to determine that it is consistent with the audited financial statements.
Which of the following best describes the auditor’s responsibility for “other information” included in the annual report to stockholders which contains financial statements and the auditor’s report?
The auditor has no obligation to read the “other information.”
The auditor has no obligation to corroborate the “other information,” but should read the “other information” to determine whether it is materially inconsistent with the financial statements.
The auditor should extend the examination to the extent necessary to verify the “other information.”
The auditor should modify the auditor’s report to state that the “other information is unaudited” or “not covered by the auditor’s report.”
The auditor has no obligation to corroborate the “other information,” but should read the “other information” to determine whether it is materially inconsistent with the financial statements.
This answer is correct because the Professional Standards require that an auditor read the “other information” to determine whether it is inconsistent with the financial statements.
When audited financial statements are presented in a client’s document containing other information, the auditor should
Perform inquiry and analytical procedures to ascertain whether the other information is reasonable.
Add an emphasis-of-matter paragraph to the auditor’s report without changing the opinion on the financial statements.
Perform the appropriate substantive auditing procedures to corroborate the other information.
Read the other information to determine that it is consistent with the audited financial statements.
Read the other information to determine that it is consistent with the audited financial statements.
When the audited financial statements are presented in a client’s document containing other information, the auditor is required to read the other information to determine whether it is consistent with the audited financial statements.
