ExpertMedium1 markMultiple Choice
CPA · Question 19 · Area IV: Forming Conclusions and Reporting
An auditor is performing a compilation engagement for a nonissuer under SSARS. The client has omitted substantially all disclosures required by GAAP. The auditor decides to issue the compilation report. Which of the following statements MUST be included in the report?
An auditor is performing a compilation engagement for a nonissuer under SSARS. The client has omitted substantially all disclosures required by GAAP. The auditor decides to issue the compilation report. Which of the following statements MUST be included in the report?
Answer options:
A.
An adverse opinion stating that the financial statements are not fairly presented.
B.
A statement that if the omitted disclosures were included, they might influence the user's conclusions about the financial statements.
C.
A disclaimer of opinion due to the scope limitation imposed by the missing disclosures.
D.
A statement that the accountant is not independent.
How to approach this question
Recall AR-C 80 rules for 'Omission of Substantially All Disclosures'. It is allowed, but you must warn the user.
Full Answer
B.A statement that if the omitted disclosures were included, they might influence the user's conclusions about the financial statements.✓ Correct
When management elects to omit substantially all disclosures in a compilation, the accountant's report must include a paragraph stating that the disclosures were omitted and that, if included, they might influence the user's conclusions. The accountant must also conclude that the omission was not intended to mislead.
Common mistakes
Thinking omission of disclosures is not allowed in compilations (it is, unlike reviews/audits).
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