An auditor is performing a compilation of a nonissuer's financial statements. The auditor is NOT independent. Which of the following is the correct reporting requirement?

Answer options:

The auditor must withdraw from the engagement.

The auditor must disclose the lack of independence in the compilation report.

The auditor should issue a qualified conclusion.

The auditor should disclose the reason for the lack of independence.

How to approach this question

Compilation + Not Independent = OK, but Disclose. Review/Audit + Not Independent = Withdraw/Disclaimer.

Full Answer

B.The auditor must disclose the lack of independence in the compilation report.✓ Correct

SSARS allows an accountant to perform a compilation even if not independent. However, the accountant must include a final paragraph in the report stating 'We are not independent with respect to [Entity].'

Common mistakes

Thinking independence is required for compilations (it's not, unlike reviews/audits).

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