An auditor is performing a compilation engagement for a nonissuer. The client refuses to provide a representation letter. The auditor should:

Answer options:

Issue a compilation report with a disclaimer.

Proceed with the compilation but disclose the lack of letter.

Withdraw from the engagement.

Downgrade to a preparation engagement.

How to approach this question

SSARS requires a Rep Letter (or equivalent acknowledgement) for Compilation and Review. Refusal = Withdrawal.

Full Answer

C.Withdraw from the engagement.✓ Correct

AR-C 80 (Compilation Engagements) requires the accountant to obtain an engagement letter and, effectively, management's acknowledgement of responsibility. While a formal 'rep letter' is strictly required for Reviews, for Compilations, if management refuses to acknowledge their responsibility for the FS (which the rep letter or engagement letter confirms), the accountant cannot proceed and must withdraw.

Common mistakes

Thinking Compilations are so low-level they don't need management cooperation.

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