Vertex Ltd.

Vertex Ltd. issues an annual report containing:

audited financial statements;
the auditor’s report;
a management review containing several financial ratios and selected operating statistics; and
a chairman’s statement discussing the company’s expected future expansion.

The auditor has read the other information obtained before the date of the auditor’s report.

The auditor discovers that the management review states:

“Revenue increased by 28% during the year.”

The audited financial statements, however, show that revenue increased by only 8%.

Management refuses to correct the statement, although the auditor concludes that the statement is a material misstatement of other information.

There is no material misstatement in the financial statements themselves.

Which ONE of the following is most appropriate?

A.

The auditor should modify the audit opinion because a material misstatement has been identified within the annual report, even though the financial statements themselves are not misstated.

B.

The auditor should describe the uncorrected material misstatement in the Other Information section, while the audit opinion on the financial statements remains unmodified because the matter concerns other information.

C.

The auditor should include the matter in an Emphasis of Matter paragraph because the incorrect revenue percentage is relevant to users’ understanding of the audited financial statements.

D.

The auditor should omit reference to the matter because SA 720 requires only consideration of inconsistencies affecting amounts recognised or disclosed in the audited financial statements.