Understand the Audit Differences for Supplementary Information, Other Information, and Required Supplementary Information

What are the differences in supplementary information, additional information, and required supplementary information? Does the audit opinion change for these? Should you perform different procedures based on the type of information included?

Below I provide information about the following:

• Supplementary Information
• Other Information
• Required Supplementary Information

1. Supplementary Information (SI)

Supplementary information is defined as information presented outside the basic financial statements, excluding required supplementary information (see below), that is not considered necessary for financial statements to be fairly-presented in accordance with the applicable financial reporting framework (e.g. FASB).  (See AU-C 725 for more guidance about supplementary information.)

• Accounting information and
• Nonaccounting information

• Look for any material misstatements in the SI as it relates the financial statements as a whole

Sample SI Opinion Language

Supplementary Information

Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The [identify accompanying supplementary information] is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.

Notice, in this example, the auditor opines on the supplementary information. AU-C 725 provides examples of language when the auditor qualifies or disclaims their opinion regarding supplementary information, and when the auditor issues an adverse opinion on such information; see the illustrations in the back of AU-C 725.

Next, let’s look at other information.

2. Other Information (OI)

Other information is financial and nonfinancial information (other than the financial statements and the audit report) that is included in an entity’s annual report. The auditor does not opine on the other information. (See AU-C 720 for more guidance about other information.)

Other information examples include:

• Reading the other information in order to identify any material inconsistencies with audited financial statements
• Comparing selected amounts or other items in the other information with the financial statements

Sample OI Opinion Language

If the auditor notes no material inconsistency or material misstatements of fact in the other information, they will include wording such as the following.

3. Required Supplementary Information (RSI)

Required supplementary information (RSI) is information that a designated accounting standard-setter (e.g., FASB, GASB) requires to accompany the basic financial statements. RSI is not part of the basic financial statements. However, the designated accounting standard-setter has determined that the information is an essential part of financial reporting. (See AU-C 730 for more guidance about required supplementary information.)

Required supplementary information examples include:

• Management discussion and analysis (MD&A) for governments
• Estimates of current or future costs of future major repairs and replacements for common interest realty associations

• Inquiry of management about methods used to create information
• Comparing the information for consistency with management responses and the financial statements
• Obtaining written representations from management

Sample RSI Opinion Language

Example auditor’s report RSI paragraph:

Required Supplementary Information

[Identify the applicable financial reporting framework (for example, accounting principles generally accepted in the United States of America)] require that the [identify the required supplementary information] on page XX be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by [identify designated accounting standards setter] who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

If the auditor can’t perform the RSI procedures or the information is faulty, see AU-C 730; illustrative language is in the back of this standard.

Supplementary Information in Compilations and Preparation Engagements

See my post about presenting supplementary information in compilation and preparation engagements.