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

When must an auditor apply procedures to supplementary information required by GAAP?

1. The auditor must engage a specialist to validate management's assertions.

2. The auditor's only responsibility is to ensure no omissions.

3. The auditor should apply certain limited procedures to the supplementary information.

4. The auditor should perform transactions tests for reasonable comparability.

The correct answer is: The auditor should apply certain limited procedures to the supplementary information.

The appropriate action an auditor must take regarding supplementary information required by GAAP is to apply certain limited procedures. This requirement ensures that the auditor assesses whether the supplementary information, which is often included in the financial statements but not necessarily audited as comprehensively, is consistent with the audited financial statements. The application of limited procedures might include inquiries of management and performing analytical procedures. While these procedures are not as comprehensive as the audit of the financial statements themselves, they are essential for providing assurance that the supplementary information is not misleading in relation to the overall context of the financial statements. This context is crucial as supplementary information can include additional disclosures that provide clarity and additional insight into the financial position and performance of the entity, thus enhancing the usefulness of the financial statements for users. The auditor's involvement in applying these procedures helps to maintain the integrity and reliability of the financial reporting process, which aligns with the responsibilities outlined under GAAP.