ExpertHard1 markMultiple Choice
CPA · Question 72 · Area I: Ethics & General Principles
An auditor is performing a review of a nonissuer's financial statements. The auditor is not independent. Which of the following is the auditor's responsibility?
An auditor is performing a review of a nonissuer's financial statements. The auditor is not independent. Which of the following is the auditor's responsibility?
Answer options:
A.
Withdraw from the engagement.
B.
Disclose the lack of independence in the review report.
C.
Issue a disclaimer of conclusion.
D.
The auditor is precluded from issuing a review report.
How to approach this question
Review = Independence Required. No Indep = No Review. (You can Compile, but you can't Review).
Full Answer
D.The auditor is precluded from issuing a review report.✓ Correct
D
AR-C 90 states that the accountant must be independent of the entity when performing a review engagement. If the accountant is not independent, they are precluded from issuing a review report. They may, however, perform a compilation engagement (AR-C 80) and disclose the lack of independence.
Common mistakes
Thinking you can disclose lack of independence in a Review (like you can in a Compilation). You cannot.
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