ACCA Advanced Audit and Assurance (AAA) Practice Exam

Which of the following is NOT included in the financial statements according to auditing standards?

1. Supporting books and records

2. Written representations from management

3. The financial statements themselves

4. Informal discussions between auditors and management

The correct answer is: Informal discussions between auditors and management

The correct answer is that informal discussions between auditors and management are not included in the financial statements according to auditing standards. This option does not represent a formal element of the financial reporting process. Financial statements are structured documents that encompass the results of a company's financial performance and position, including balance sheets, income statements, cash flow statements, and notes. These documents provide a comprehensive overview of a company's financial health as mandated by accounting standards. On the other hand, the other options refer to essential components of the audit process and the financial statement preparation. Supporting books and records are critical as they provide the foundational data and documentation that underpin the figures reported in the financial statements. Written representations from management serve as evidence regarding the accuracy and completeness of the financial information and reflect management’s responsibility for the statements. The financial statements themselves are, of course, the primary focus of any audit. In contrast, informal discussions, while potentially valuable for understanding management's perspectives, do not comprise the formal documentation or reporting structure required by auditing standards, thus confirming why this option is the one not included in financial statements.