An annual shareholders' report includes audited financial statements and contains
supplementary information required by GAAP. Is it permissible for the auditor to report on such
information?

A. No, because such reporting may lead to the belief that the auditor is responsible for the
information.
B. No, because the auditor has no responsibility to read the other information in a document
containing audited financial statements.
C. Yes, provided the report provides negative assurance only.
D. Yes, provided the auditor performs sufficient audit procedures to determine whether the
information is fairly stated, in all material respects, in relation to the financial statements.

Answer(s): D
Explanation:
Choice "d" is correct. If the auditor performs sufficient procedures, he or she may report on
whether the information is fairly stated, in all material respects, in relation to the financial
statements. Choices "a" and "b" are incorrect. The auditor may report on such information.
Choice "c" is incorrect. The report provides positive assurance about whether the information is
fairly stated, in all material respects, in relation to the financial statements.
QUESTION: 146
Tech Company has disclosed an uncertainty due to pending litigation. The auditor's decision to
issue a qualified opinion rather than an unqualified opinion most likely would be determined by
the:

A. Lack of sufficient evidence.
B. Inability to estimate the amount of loss.
C. Entity's lack of experience with such litigation.
D. Lack of insurance coverage for possible losses from such litigation.

Answer(s): A
Explanation:
Choice "a" is correct. Lack of sufficient evidence to support management's assertions would
most likely cause an auditor to issue a qualified or disclaimer of opinion. Choice "b" is incorrect.
As long as it is fully disclosed, an inability to estimate the amount of loss from a future event
(outcome of pending legislation) would most likely result in an unqualified opinion. Choices "c"
and "d" are incorrect. Neither a lack of experience nor a lack of insurance coverage would
impact the auditor's report.
QUESTION: 147
It is not appropriate to refer a reader of an auditor's report to a financial statement footnote for
details concerning:

A. Subsequent events.
B. The pro forma effects of a business combination.
C. Sale of a discontinued operation.
D. The results of confirmation of receivables.

Answer(s): D

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