The annual reports for publicly traded companies typically include information that is not part of management's financial statements and, therefore, that is not captured in a financial statement audit. Examples include the chief executive officer's (CEO's)

letter to shareholders, nonfinancial information about product lines, and summaries of significant financial results over a five- or ten-year period. Under Statement on Auditing Standards No. 8, "Other Information in Documents Containing Audited Financial Statements"

(AU Sec. 550), an auditor is not obligated to corroborate, but should read, the other information to determine whether the information (or the way the information is presented) is inconsistent with the financial statements. For example, if the income statement report earnings per share (EPS) of $5.25, the CEO's letter should not report a higher EPS. The auditor should revise the audit report, withhold the report, or withdraw from the engagement if the client refuses to revise an inconsistency.

Required:

Explain the role of SAS No. 8, given that an audit reports on management's financial statement assertions, and SAS No. 8 addresses information outside of the financial statements.