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ISA 720, the auditor’s responsibilities relating to other information in documents containing audited financial statements
Other information refers to financial or non-financial information, other than the financial statements and auditor’s report thereon. Here on MCQs.club we have prepared easy Multiple-Choice Questions (MCQs) on ISA 720 revised IFAC that fully cover the ISA 720 summary and definition, ISA 720 MCQs with answers, these MCQs are a basis of conclusions. These MCQ on SA 720 are helpful for Competitive exams, Professional Accountancy exams and Business management exams.
- Other information refers to financial or non-financial information, other than the financial statements and auditor’s report thereon. Examples of other information include:
- Chairman’s report
- Operating and financial review
- Social and environmental reports
- Corporate governance statements.
- All of the above
- If the auditor obtains the final version of the other information before the date of the auditor’s report, they must read it to identify any material inconsistencies with the financial statements or the auditor’s knowledge obtained during the audit.
- The above statement is correct
- The above statement is incorrect
- If the auditor identifies a material inconsistency in “Other Information” they should:
- Discuss the matter with management and ask them to make the correction.
- If management refuse to make the correction, communicate the matter to those charged with governance.
- If the matter remains uncorrected the auditor must describe the material misstatement in the auditor’s report.
- All of the above
- When a separate section is included in the auditor’s report under the heading ‘Other Information’, this section shall:
- Identifies the other information obtained by the auditor prior to the date of the auditor’s report.
- States that the auditor has not audited the other information and accordingly does not express an opinion or conclusion on that information.
- States either that the auditor has nothing to report or provides a description of the material misstatement if applicable.
- All of the above
- The Other Information section is included in the auditor’s report below the Basis for Opinion and Key Audit Matters section (if applicable) and above the Responsibilities of Management.
- True
- False
- Which of the following statement is correct?
- Material misstatements or inconsistencies in the other information may undermine the credibility of the financial statements and the auditor’s report.
- If the auditor issues a disclaimer of opinion on the financial statements, the Other Information section should not be included in the auditor’s report as to do so may overshadow the disclaimer of opinion.
- Both A&B
- None
- The auditor shall read the other information and, in doing so shall:
- Consider whether there is a material inconsistency between the other information and the financial statements.
- Consider whether there is a material inconsistency between the other information and the auditor’s knowledge obtained in the audit, in the context of audit evidence obtained and conclusions reached in the audit.
- Both A&B
- None
- If the auditor identifies that a material inconsistency appears to exist the auditor shall discuss the matter with management and, if necessary, perform other procedures to conclude whether:
- A material misstatement of the other information exists
- A material misstatement of the financial statements exists
- The auditor’s understanding of the entity and its environment needs to be updated.
- All of the above
- If the auditor concludes that a material misstatement of the other information exists, the auditor shall request management to correct the other information. If management:
- Agrees to make the correction, the auditor shall determine that the correction has been made
- Refuses to make the correction, the auditor shall communicate the matter with those charged with governance and request that the correction be made.
- Both A&B
- None
- If the auditor concludes that a material misstatement exists in other information obtained prior to the date of the auditor’s report, and the other information is not corrected after communicating with those charged with governance, the auditor shall take appropriate action, including:
- Considering the implications for the auditor’s report and communicating with those charged with governance about how the auditor plans to address the material misstatement in the auditor’s report.
- Withdrawing from the engagement, where withdrawal is possible under applicable law or regulation.
- Both A&B
- None
- If the auditor concludes that a material misstatement exists in other information obtained after the date of the auditor’s report, the auditor shall:
- If the other information is corrected, perform the procedures necessary in the circumstances.
- If the other information is not corrected after communicating with those charged with governance, take appropriate action considering the auditor’s legal rights and obligations.
- Both A&B
- None
- When the auditor’s report is required to include an “Other Information section”, this section shall include:
- A statement that management is responsible for the other information
- A description of the auditor’s responsibilities relating to reading, considering and reporting on other information as required by ISA 720.
- Both A&B
- None
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