Multiple Choice Questions
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 if there is any material inconsistency with the audited financial statements.
(4) The auditor must provide a disclaimer of opinion related to the MD&A infor mation.
b. Ansman, CPA, has been requested by a client, Rainco Corp., to prepare information in addition to the basic financial statements for this year's audit. Which of the following is the best reason for Rainco's requesting the additional information?
(1) To provide an opinion about the supplemental information when certain items are not in accordance with accounting standards.
(2) To provide Rainco's creditors a greater degree of assurance as to the financial soundness of the company.
(3) To provide Rainco's management with information to supplement and analyze the basic financial statements.
(4) To provide the documentation required by the SEC in anticipation of a public offering of Rainco's stock.
c. Management of Thurman Corporation included additional supplementary information in documents that include the audited financial statements for the year ended December 31, 2011. 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, 2011 through February 15, 2012.
(3) Wally's opinion of the basic financial statements was unqualified.
(4) When evaluating supplementary information, Wally plans to use the same materiality threshold as that used in the audit of the basic financial statements.