An auditor is performing a preparation engagement under SSARS for a nonissuer. Which of the following is TRUE regarding the independence requirement?

Answer options:

Independence is not required.

Independence is required, and lack of independence must be disclosed.

Independence is required, and lack of independence requires withdrawal.

Independence is required only if the financial statements are to be used by third parties.

How to approach this question

SSARS Hierarchy: Preparation (No Report, No Independence). Compilation (Report, No Independence but disclose). Review (Report, Independence Required).

Full Answer

A.Independence is not required.✓ Correct

A preparation engagement (AR-C 70) is a non-attest service where the accountant prepares financial statements but does not issue a report. Independence is not required.

Common mistakes

Confusing Preparation (No Indep) with Compilation (No Indep but Disclose) or Review (Indep Required).

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