A. Defin ition
Supplementary information is information presented outside the basic financial statements that may be presented in a document containing the audited financial statements or separate from the financial statements.
B. Reporting on Supplementary I nformation
An auditor may be engaged to report on supplementary information in relation to the financial statements as a whole. The auditor has two objectives in such engagements:
1. to evaluate the presentation of the supplementary information in relation to the financial statements as a whole; and
2 . to report o n whether the supplementary information is fairly stated, in all material respects, in relation to the financial statements as a whole.
C. Conditions for Reporting
In order to issue an opinion on whether the supplementary information is fairly stated in all material respects in relation to the financial statements as a whole, the auditor must determine that the following conditions are met:
1. the information was derived from or relates directly to the information used to prepare the financial statements;
2 . the information relates to the same period a s the financial statements;
3. the financial statements were audited and the auditor issued an auditor's report;
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4. neither an adverse opinion nor a disclaimer of opinion was issued on the financial statements; and
5. the supplementary information will accompany the audited financial statements or the audited financial statements will be made readily available by the entity.
D. Management Responsibility
The auditor must obtain an agreement of management that it acknowledges and understands its responsibilities to:
1. prepare the information in accordance with applicable criteria;
2. provide the auditor with written representations related to the information;
3. include the auditor's report on the supplementary information in any document that contains the information; and
4. present the information with the audited financial statements or make the audited financial statements readily available to the intended users of the supplementary information by the issuance date of the supplementary information and auditor's report.
E. Audit Procedures
In addition to the procedures performed during the audit of the financial statements, the auditor should perform the following audit procedures using the same materiality level used in the financial statement audit:
1. Inquire of management regarding the purpose of the supplementary information and the criteria used to prepare the information.
2. Determine whether the form and content of the information complies with the applicable criteria.
3. Obtain an understanding of the methods used to prepare the information, and any changes from the methods used in the prior periods, including the reasons for the changes.
4. Compare and reconcile the information to the audited financial statements and u nderlying accounting records .
5 . I nquire regarding any significant assumptions underlying the preparation o r presentation of the information.
6. Evaluate the appropriateness and completeness of the information.
7. Obtain written representations from management regarding the information.
The auditor has no responsibility to consider subsequent events with respect to supplementary information .
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F. Reporting
The auditor's report on the supplementary information may either be presented as an other
matter paragraph in the auditor's report on the financial statements or in a separate report.
1 . Sample Other-Matter Paragraph
Other Matter
Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The [identify accompanying supplementary information] is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.
2. Separate Report
When reporting separately, the report should include a reference to the report on the financial statements, the date of that report, the nature of the opinion on the financial statements, and any report modifications. The auditor may also consider including an alert that restricts the use of the separate report solely to the appropriate specified parties to avoid potential m isinterpretation or misunderstanding of the supplementary information that is not presented with the financial statements.
3. Report Date
The date of the auditor's report should not be earlier than the date that the required procedures were completed.
4. Material Misstatement of Supplementary Information
If the auditor concludes that the supplementary information is materially misstated in relation to the financial statements as a whole and management refuses to revise the information, that auditor should:
a. Modify the opinion on the supplementary information (qualified or adverse) and describe the misstatement.
b. If a separate report is being issued on the supplementary information , withhold the report.
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III. REQUIRED SUPPLEMENTARY INFORMATION