ExpertHard1 markMultiple Choice
CPA · Question 36 · Area IV: Forming Conclusions and Reporting
An auditor is performing a review of a nonissuer's financial statements under SSARS. The auditor becomes aware of a material departure from GAAP. Management refuses to correct the departure. The auditor determines that the departure is so pervasive that a modification to the conclusion is not adequate to communicate the deficiencies. What should the auditor do?
An auditor is performing a review of a nonissuer's financial statements under SSARS. The auditor becomes aware of a material departure from GAAP. Management refuses to correct the departure. The auditor determines that the departure is so pervasive that a modification to the conclusion is not adequate to communicate the deficiencies. What should the auditor do?
Answer options:
A.
Issue an adverse conclusion.
B.
Withdraw from the engagement.
C.
Issue a disclaimer of conclusion.
D.
Restrict the use of the report to internal management.
How to approach this question
SSARS Review Rule: Modify (Qualified) if material. Withdraw if Pervasive/Misleading. (Note: Adverse conclusions are rare/not the standard path in SSARS reviews compared to withdrawal).
Full Answer
B.Withdraw from the engagement.✓ Correct
Under AR-C 90, if the accountant believes that modification of the conclusion is not adequate to indicate the deficiencies in the financial statements (i.e., they are misleading), the accountant should withdraw from the engagement.
Common mistakes
Selecting Adverse Conclusion. While an adverse opinion exists in audits, in SSARS reviews, the guidance emphasizes withdrawal when the report would be misleading.
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