report were included in the annual report, the auditor stil has the same responsibility regarding
both the management report and the annual report: the auditor should read the information and
consider whether it contains a material inconsistency or material misstatement of fact.
QUESTION: 122
An auditor is reporting on condensed financial statements for an annual period that are derived
from the audited financial statements of a publicly-held entity. The auditor's opinion should
indicate whether the information in the condensed financial statements is fairly stated in all
material respects:

A. In conformity with accounting principles generally accepted in the United States of America.
B. In relation to the complete financial statements.
C. In conformity with an other comprehensive basis of accounting.
D. In relation to supplementary filings under federal security statutes.

Answer(s): B
Explanation:
Choice "b" is correct. The auditor should report whether the information in the condensed
financial statements is fairly stated, in all material respects, in relation to the financial statements
from which it has been derived. Choice "a" is incorrect. Condensed financial statements do not
include all of the disclosures required by GAAP, and therefore would not typically be presented
in conformity with GAAP. Choice "c" is incorrect. Condensed financial statements are presented
in less detail than complete financial statements, but the fact pattern gives no indication that any
comprehensive basis of accounting other than GAAP has been used. Choice "d" is incorrect.
The auditor should report whether the information in the condensed financial statements is fairly
stated, in all material respects, in relation to the financial statements from which it has been
derived, not in relation to supplementary filings under federal security statutes.
QUESTION: 123
An auditor determines that the entity is presenting certain supplementary financial disclosures of
pension information that are required by the GASB. Under these circumstances, the auditor
should:

A. Add an explanatory paragraph to the auditor's report that refers to the required
supplementary information.
B. State that the audit is not being performed in accordance with general y accepted auditing
standards.
C. Document in the working papers that the required supplementary information is presented,
but should not apply any procedures to the information.
D. Compare the required supplementary information for consistency with the audited financial
statements.

Answer(s): D
Explanation:
Choice "d" is correct. The auditor should perform certain limited procedures on supplementary
information accompanying the financial statements, including evaluating whether the information
is consistent with the audited financial statements. Choice "a" is incorrect. Generally, the
auditor's report on the financial statements would not include a reference to required
supplementary information unless there were a problem with it (e.g., it was omitted,

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