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MMLU / During an engagement to compile the financial statements of a nonissuer an…

Problem

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question

During an engagement to compile the financial statements of a nonissuer an accountant becomes aware that management had stated land at appraised value and that if GAAP had been followed both the land account and stockholders' equity would have been decreased by $1 million a material amount. The accountant decides to modify the standard compilation report because management will not revise the financial statements. Under these circumstances the accountant should

choices

  1. Issue either an adverse opinion or a qualified opinion depending on materiality because of the departure from GAAP.
  2. Add a separate paragraph to the accountant's report that restricts the distribution of the financial statements to “internal use only.”
  3. Add a separate paragraph to the accountant's report that discloses the departure from GAAP and its effects on the financial statements.
  4. Add a separate paragraph to the accountant's report that explains the underlying purpose of recording assets at historical cost.

subject

professional_accounting

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Source and history

task_id
b4a1e2d2-4b2d-5c9a-9d9a-bf5f0c11f1b5
task_key
all--test--b4a1e2d2-4b2d-5c9a-9d9a-bf5f0c11f1b5
task_revision_id
1
config / split
all / test

Official source

initial import