AUD 6

Question 1

An accountant’s compilation report on the unaudited financial statements of a nonissuer should:

1. State that the accountant has no responsibility to update the report for events and circumstances occurring after the date of the report
2. Provide negative assurance on the financial statements
3. Disclaim an opinion on the financial statements
4. Indicate that the financial statements are not designed for those that are not informed about internal company matters

Answer 1

Choice “3” is correct. The report should state that the accountant does not express an opinion on the financial statements.
Choice “1” is incorrect. The report would not state that the accountant has no responsibility to update the report for events and circumstances occurring after the date of the report. Language similar to this is included in reports on prospective financial statements.
Choice “2” is incorrect. The report should state that the accountant does not express any form of assurance on the financial statements.
Choice “4” is incorrect. The report would not indicate that the financial statements are not designed for those who are not informed about internal company matters. If management omitted all disclosures required by GAAP, a statement similar to this would be used; however, the question does not indicate that this is the case.

Question 2

An accountant compiles the financial statements of a nonissuer and issues a standard compilation report. Although not specifically stated in this report, it is implied:

1. The accountant has not audited or reviewed the financial statements
2. Substantially all disclosures required by GAAP are included in the financial statements
3. The financial statements should not be used to obtain credit
4. The compilation is limited to presenting information that is the representation of management

Answer 2

Choice “2” is correct. A standard compilation report implies that substantially all disclosures required by GAAP are included in the financial statements.

Choice “1” is incorrect. The standard compilation report explicitly states that the accountant has not reviewed or audited the financial statements.

Choice “3” is incorrect. The financial statements may be used to obtain credit.

Choice “4” is incorrect. The standard compilation report addresses this by stating, “Management is responsible for the financial statements…”