An auditor is performing a review engagement under SSARS (AR-C 90) for a nonissuer. The auditor becomes aware of a material departure from the applicable financial reporting framework. Management refuses to correct the departure. The auditor determines that the departure is material but NOT pervasive. Which of the following is the MOST appropriate report modification?

Answer options:

Issue an adverse conclusion because the departure is material.

Issue a qualified conclusion and add a separate paragraph under the heading 'Known Departure from [Framework]' describing the matter.

Withdraw from the engagement as a review provides limited assurance and cannot accommodate known departures.

Issue an unmodified conclusion but add an Emphasis-of-Matter paragraph describing the departure.

How to approach this question

Identify the engagement (Review/SSARS). Identify the issue (GAAP departure). Assess severity (Material, Not Pervasive). Match to report type (Qualified).

Full Answer

B.Issue a qualified conclusion and add a separate paragraph under the heading 'Known Departure from [Framework]' describing the matter.✓ Correct

Modify the review report with a 'Known Departure from the [Framework]' paragraph and a qualified conclusion.

Under AR-C 90, if the accountant becomes aware of a material departure that is not pervasive, they should express a qualified conclusion. The report should include a separate paragraph describing the departure.

Common mistakes

Confusing Emphasis-of-Matter (for correct disclosures) with modification paragraphs (for errors); thinking reviews cannot be qualified.

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