$24-24($Objective $24-5)$ The following questions concern information accompanying

basic financial statements. Choose the best response.

a $.$ The Form $10-$K filed by management of a public company includes a section on

manage ment$$s discussion and analysis $($MD&A$)$ in addition to the annual financial

statements. Which of the following best describes the auditor$$s responsibility for the

MD&A information?

$(1)$ The auditor must perform sufficient appropriate audit procedures to opine on

the MD&A information.

$(2)$ The auditor has no responsibilities related to the MD&A disclosures.

$(3)$ The auditor must read the MD&A information to determine if there is any

material inconsistency with the audited financial statements.

$(4)$ The auditor must provide a disclaimer of opinion related to the MD&A infor mation.

b $.$ Management of Thurman Corporation included additional supplementary informa

tion in documents that include the audited financial statements for the year ended

December $31,2013.$ Management has asked its audit firm, Wally, CPAs, whether they

can report on the supplementary information. Which of the following conditions

would preclude Wally, CPAs, from conducting this engagement?

$(1)$ The supplementary information is derived from the accounting records used to

generate the basic financial statements.

$(2)$ The supplementary information covers the period January $1,2013,$ through

February $15,2014.$

$(3)$ Wally$$s opinion of the basic financial statements was unqualified.

$(4)$ When evaluating supplementary information, Wally plans to use the same

materiality threshold as that used in the audit of the basic financial statements.

c $.$ Investment and property schedules are presented for purposes of additional analysis

in a document outside the basic financial statements. The schedules are not required

supplementary information. When the auditor is engaged to report on whether the

supplementary information is fairly stated in relation to the audited financial state

ments as a whole, the measurement of materiality is the

$(1)$ greater of the individual schedule of investments or schedule of property by itself.

$(2)$ lesser of the individual schedule of investments or schedule of property by itself.

$(3)$ same as that used in forming an opinion on the basic financial statements as a

whole.

$(4)$ combined total of both the individual schedules of investments and property as

a whole.

$24-25$

$1.$ Explain why an auditor is interested in a client$$s future commitments to purchase raw materials at a fixed price.