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

Regarding supplementary financial information mandated by FASB, what is the correct auditor responsibility?

1. The auditor is required to report any omissions.

2. The auditor should conduct tests of details of transactions.

3. The auditor should perform limited procedures.

4. The auditor should only read the supplementary financial information.

The correct answer is: The auditor should perform limited procedures.

When dealing with supplementary financial information mandated by the Financial Accounting Standards Board (FASB), the auditor's primary responsibility is to perform limited procedures to assess whether the supplementary information is presented fairly in relation to the financial statements as a whole. This involves performing certain inquiries and analytical procedures rather than comprehensive testing like a full audit of those supplementary statements. The rationale behind this approach is that while supplementary information is important, it is not as exhaustive or critical as the primary financial statements. Limited procedures provide enough assurance to the auditor regarding the reasonableness of the information without the need for full audit testing. The auditor may engage in activities such as checking for consistency with the primary financial statements and evaluating whether the supplementary information is appropriately disclosed, thus maintaining a level of professional skepticism while not conducting a full audit of the supplementary information. This level of scrutiny is specifically designed to suit the purpose and relevance of supplementary information in relation to overall financial reporting.