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

What action should an auditor take regarding supplementary financial information presented with audited financial statements?

1. Apply substantive tests on the supplementary information.

2. Verify its conformity with accounting principles.

3. Perform limited procedures and report on the information.

4. Only assess if omissions exist in the supplementary information.

The correct answer is: Perform limited procedures and report on the information.

The appropriate action an auditor should take regarding supplementary financial information presented with audited financial statements is to perform limited procedures and report on that information. This process involves the auditor applying certain analytical procedures or inquiries to evaluate the reasonableness and completeness of the supplementary information, typically without a high level of assurance. When auditors are engaged with supplementary financial information, it is important to note that while this information may be considered a part of the audited financial statements, it often requires less rigorous examination than the primary financial statements themselves. By conducting limited procedures, auditors can ensure that the supplementary information is free from material misstatement and fairly presents additional context without having to perform exhaustive substantive testing. The key outcome of performing limited procedures is that the auditor can provide a report, which informs users about the adequacy of the supplementary information while clarifying that the report does not express an audit opinion on that information. This helps maintain the auditor's responsibility for the audited statements while recognizing the supplementary data's role in enhancing the understanding of those statements. Engaging solely in applying substantive tests would imply a deeper level of scrutiny that is not typically required for supplementary information. Verifying conformity with accounting principles might be relevant if the supplementary information is being claimed to follow specific accounting standards but isn’t the primary