The following questions concern information accompanying basic financial statements. Choose the best response.
a. The Form 10-K filed by management of a public company includes a section on
management’s discussion and analysis (MD&A) in addition to the annual financial
statements. Which of the following best describes the auditor’s responsibility for the
MD&A information?
(1) The auditor must perform sufficient appropriate audit procedures to opine on
the MD&A information.
(2) The auditor has no responsibilities related to the MD&A disclosures.
(3) The auditor must read the MD&A information to determine whether there is any
material inconsistency with the audited financial statements.
(4) The auditor must provide a disclaimer of opinion related to the MD&A information.
b. Management of Thurman Corporation included additional supplementary informa-
tion in documents that include the audited financial statements for the year ended
December 31, 2019. Management has asked its audit firm, Wally, CPAs, whether they
can report on the supplementary information. Which of the following conditions
would preclude Wally, CPAs, from conducting this engagement?
(1) The supplementary information is derived from the accounting records used to
generate the basic financial statements.
(2) The supplementary information covers the period January 1, 2019, through Feb-
ruary 15, 2020.
(3) Wally’s opinion on the basic financial statements was unmodified.
(4) When evaluating supplementary information, Wally plans to use the same mate-
riality threshold as that used in the audit of the basic financial statements.
c. Investment and property schedules are presented for purposes of additional analysis
in a document outside the basic financial statements. The schedules are not required
supplementary information. When the auditor is engaged to report on whether the
supplementary information is fairly stated in relation to the audited financial state-
ments as a whole, the measurement of materiality is the
(1) greater of the individual schedule of investments or schedule of property by itself.
(2) lesser of the individual schedule of investments or schedule of property by itself.
(3) same as that used in forming an opinion on the basic financial statements as a whole.
(4) combined total of both the individual schedules of investments and property as
a whole
