Question

Soal 15. (Ch. 24). As a part of the audit of R.D.M. Company, a nonpublic company, management request basic financial statements and separately, the same basic financial statements accompanied by additional information Management informs you that the intent is to use the basic financial statement for bankers, other creditors, and the two owners who are not involved in management. The basic financial statement accompanied by the additional information are to be used only by management. Management requests the inclusion of specific information, but asks that no audit work be done beyond what is needed for the basic financial statements. The following is requested: 1. A schedule of insurance in force. 2. The auditor's feeling about the adequacy of the insurance coverage. 3. An aged trial balance of Account Receivable (A/R) and evaluation of the adequacy of the allowance for uncollectible accounts. 4. A summary of fixed asset additions 5. Material weaknesses in internal control and recommendations to improve internal control. 6. A 5-year summary of the most important company ratios, with the appropriate ratios in be determined at the auditor's discretion. 7. A schedule of Note Payable accompanied by interest rates, collected, and a payment schedule. Required: a. What is the difference between basic financial statement and additional information? b. What are the purpose of additional information accompanying basic financial statement.?. c. For the previously listed items (1 through 7), state which ones could appropriately be included as additional information. Give reasons for your answer. d. Assume that an unqualified opinion is proper for the basic financial statements report that no testing was done beyond that required for the basic financial statement report, and that only appropriate information is included in the additional information. Write the proper auditor report

Answer 1

RASIL PNGENO. DATE Solution Difference Between Basic Financial Statement and additional Information and here under (a) Basic Financial Statement lie. Balance Sheet, Profit & los Account, cashflow statement au written records of a Busines financial Position where as other Additional information is that lorormation which a Auditor Include in its audit Report but which is in addition to a financial statement and that additional Information can be related to financial or non-financialelament and (b.) purpose of addition and Information accompanying basic financial statement aw as below! - To determine any in consistency between the Other Information and the financial Statements - To de there is any material Inconsistency in between Other Information and the auditor's knowledge obtained in the audit, -To respond appropriately when the auditor Identifies that such material inconsistencies appear to exist. (c.) Item No.5 (i.e. Material weakness in internal Control and recommendations to Improve Internal Control) is the item which could appropriately be included as additional information. Reason - The above Items in addition to financial Statement, and not directly related to

financial Statement (d) Auditor's Repost To The Mangement R.s.m. Company We have audited the financial Statements of R.D.m Company as of a 20... and the related notes to the financial statement. Management Responsibility for the financial Staternit Management is responsible for the Preparation and percesentation of the financial statements in accordance with accounting Principals gevesally accepted in the Clowntoya bime) o "napos generasy Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted ous audits in accordance with auditing Standardo generally accepted in the Country Aame These standards esquire that we plan and perform the audit to obtain blasonable arrurance about whether the financial statements au fell from Material Misstatement. We Believe that the audit evidence, we have obtained is sufficient and appropriate to provide a basis for our audit opinion!

. Opinion Albania and there are In Our Opinjon the Pinancial Matement Belfosed to above present fairely, in all material respect, the Financial position of a Dom Company as of 2o. are in accordance with Accounting Principles generally accepted 49 12 Firm | Charlerool Accountants Date month year