Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

Is it acceptable for an auditor to report on supplementary information in an annual shareholders' report?

1. Yes, only if negative assurance is provided.

2. No, due to responsibility concerns.

3. Yes, if sufficient audit procedures confirm the information is fairly stated.

4. No, since auditors do not read other information in audited documents.

The correct answer is: Yes, if sufficient audit procedures confirm the information is fairly stated.

The appropriateness of an auditor reporting on supplementary information in an annual shareholders' report hinges on the conduct of sufficient audit procedures to confirm that the information presented is fairly stated. When an auditor conducts an audit, they gather evidence about the entity's financial statements and ascertain whether these statements are free from material misstatement. If the supplementary information, which may include financial performance projections or other non-financial data, is tightly linked to the audited financial statements and the auditor can perform the necessary procedures to measure its fairness, then an opinion on that information can be offered confidently. This allows the auditor to provide assurance that helps users of the report, such as shareholders, understand and trust the additional context provided alongside the main financial statements. In contrast, merely providing negative assurance without confirmed procedures would not suffice to substantiate the reliability of supplementary information. Thus, it is crucial for auditors to apply rigorous standards and perform appropriate procedures when reporting on such additional data to uphold the integrity and reliability that stakeholders expect from audited reports.