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Hi sir.
Do you mind to explain the difference between Other Matters paragraph and Other information on audit report?
I stumbled upon this question in Kaplan Exam Kit, question 129, multiple choices.
Text: You are completing the audit of Pacific Co and the auditor’s report is due to be signed shortly. Revenue for the year is $2.6 million, profit before tax is $1.4 million and total assets are $7.5 million. A key customer, with a receivables balance at the year-end of $85000, has just notified Pacific that they are unlikely to be able to pay the balance due to cash flow problems and have asked for an extension of credit for a further three months. You believe that an allowance should be made. The finance director has notified the auditor that he will make adjustment for this balance in the following year’s financial statements if the debt is not paid in three months.
Question & Answer 129: Select whether the following elements should be included in the auditor’s report of Pacific Co.
1. Addressee – Yes
2. Other Matter paragraph – No
3. Other Information – Yes
4. Emphasis of Matter – NoWhat is Other Information and why is it a yes, sir?
Thank you in advance ??
“Other information” refers to anything in the annual report other than the financial statements – e.g. chairman’s statement, directors report, etc. Suppose the financial statements show a profit for the year that is less than the prior year comparative but the chairman’s statement states that profit has increased. This misstatement of fact could confuse/mislead the reader and potentially undermine the credibility of the audit opinion. So the auditor would include a para in the auditor’s report pointing out the misstatement in the other information.
I do not have the Kaplan Kit but based on what you have written, there would not be an other information paragraph.
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