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Responsibilities of a CPA

Problem 17-38 Unit 9, Chapter 17 Rittenberg/Schwieger/Johnstone-Auditing 6e book.
(Types of Engagements and Reports)
The fourth standard of reporting states: "The auditor must either express an opinion regarding the financial statements, taken as a whole, or state that an opinion cannot be expressed in the auditor's report. In all cases where an auditor's name is associated with financial statements, the report should contain a clear-cut indication of the character of the auditor' work, if any, and degree of responsibility the auditor is taking."
In each of the following independent situations, indicate how the CPA responds to this standard.
(a) The CPA is engaged to prepare the financial statements for a non-public entity without performing an audit or review.
(b) The CPA is engaged to compile and review the financial statements of a nonpublic company.
(c) The CPA is engaged to prepare the federal and state income tax returns. No other services are provided.
(d) The CPA is engaged to audit the annual financial statements of a public company.
(e) The CPA's name is contained in the client's registration statement that includes audited financial statements for the year ended December 31, 2007, and unaduited financial statements for the three months ended March 31, 2008. The SEC requires the CPA to include in the registration statement consent to the use of the public accounting firm's name in the statement.

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Anna Liza Gaspar


Situation A
The task is preparing financial statements rather than an audit. Hence, the CPA must clearly estate that the engagement is for the preparation of financial statements rather than expressing an opinion on those FS.

Situation B
This engagement is for a review of a non-public entity's ...

Solution Summary

This solution of 258 words explains how a CPA will respond in different scenarios in compiling financial statements, preparing federal and state income tax returns and formal declaration of an audit.