PCAOB: Auditing Standards - Auditing Supplemental Information Accompanying Audited FS

Question 1

Objective

Answer 1

“To obtain sufficient appropriate audit evidence to express an opinion on whether the supplemental information is fairly stated, in all material respects, in relation to the financial statements as a whole.”

Question 2

Supplemental Information Refers to the following information when it accompanies audited financial statements

Answer 2

a. Supporting schedules that brokers and dealers are required to file pursuant to Rule 17a-5 under the Securities Exchange Act of 1934;
b. Supplemental information (i) required to be presented pursuant to the rules and regulations of a regulatory authority and (ii) covered by an independent public accountant’s report on that information in relation to financial statements that are audited in accordance with PCAOB standards; or
c. Information that is (i) ancillary to the audited financial statements, (ii) derived from the company’s accounting books and records, and (iii) covered by an independent public accountant’s report on that information in relation to the financial statements that are audited in accordance with PCAOB standards.”

Question 3

Overview of the performance and reporting requirements associated with AS #17

Answer 3

1. The auditor is required to perform audit procedures specifically to test the supplemental information.
2. The auditor is required to evaluate (a) whether the supplemental information is fairly presented in relation to the audited financial statements; and (b) whether the supplemental information complies with the relevant regulatory requirements (or other criteria, if applicable).
3. The auditor is required to coordinate audit work on the supplemental information with audit work on the related financial statements.
4. The auditor is required to clearly report the auditor’s responsibilities and conclusions when reporting on supplemental information.

Question 4

Audit Procedures to be performed

Answer 4

1. Obtain an understanding of the purpose of the information and the criteria used by management for its presentation;
2. Obtain an understanding of the methods used to prepare the information, evaluate the appropriateness of those methods, and determine whether those methods are consistent with those used in the prior period;
3. Inquire of management about any significant assumptions underlying the presentation of the information;
4. Determine that the information reconciles to the financial statements or other applicable records;
5. Perform procedures to test the completeness and accuracy of the information (if not already tested in connection with the audit of the financial statements);
6. Evaluate whether the information complies with relevant regulatory requirements (or other applicable criteria); and
7. Obtain appropriate management representations: (a) that management acknowledges responsibility for the fair presentation of the information; (b) that management believes the information is fairly stated; (c) that the methods used have not changed from the prior period (if changed, state that the reasons for the changes are appropriate); (d) that the information complies with regulatory requirements or other applicable criteria; and (e) that management believes any underlying assumptions are appropriate.

Question 5

Reports issued

Answer 5

May issue combined or seperate

Question 6

Effects of modifications of a report on the FS – The auditor should evaluate whether any modification of the report on the financial statements is relevant to the opinion to be expressed on the supplemental information.

Answer 6

1. Qualified opinion on the financial statements – The auditor should express a qualified opinion on the supplemental information if the basis for the qualification also applies to the supplemental information.
2. Adverse opinion (or disclaimer) on the financial statements – The auditor should likewise express an adverse opinion (or disclaimer) on the supplemental information.