ExpertMedium1 markMultiple Choice
CPA · Question 59 · Area IV: Forming Conclusions and Reporting
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?
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:
A.
The auditor must withdraw from the engagement.
B.
The auditor must disclose the lack of independence in the compilation report.
C.
The auditor should issue a qualified conclusion.
D.
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
The auditor must disclose the lack of independence in the compilation report.
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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