Exam AUD topic 1 question 231 discussion

Actual exam question from AICPA's AUD

Question #: 231
Topic #: 1

Jones Retailing, a nonissuer, has asked Winters, CPA, to compile financial statements that omit substantially all disclosures required by generally accepted accounting principles. Winters may compile such financial statements provided the:

A. Reason for omitting the disclosures is explained in the engagement letter and acknowledged in the management representation letter.
B. Financial statements are prepared on a comprehensive basis of accounting other than generally accepted accounting principles.
C. Use of the financial statements is restricted to internal use only.
D. Omission is not undertaken to mislead the users of the financial statements and is properly disclosed in the accountant's report.

Show Suggested Answer

Suggested Answer: D 🗳️
Choice "D" is correct. An accountant may compile FS that omit substantially all disclosures required by GAAP provided the omission is not undertaken to mislead the users of the FS and is properly disclosed in the accountant's report as an additional third paragraph.
Choice "A" is incorrect. There is no requirement that the reason for omitting the disclosures be explained in an engagement letter or acknowledged in the management representation letter (which, by the way, is not required for compilation engagements).
Choice "B" is incorrect. Financial statements compiled in accordance with GAAP may omit substantially all required disclosures.
Choice "C" is incorrect. Substantially all disclosures required by GAAP may be omitted in a compilation without restricting use to internal parties

by gemazyni at April 5, 2025, 4:21 p.m.

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