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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Audit-related and assurance services

Before accepting a compilation engagement for Cedar Logistics Ltd, the accountant is determining what must be agreed with management. Which matter must be included in the agreed terms of engagement under ISRS 4410 (Revised)?

The engagement terms must set out the intended use and distribution of the information and confirm management's responsibility for the completeness and accuracy of the underlying information. They do not include analytical procedures or assurance materiality, since a compilation provides no assurance.

  1. AThe accountant's agreement to perform analytical procedures over all material balances
  2. BThe intended use and distribution of the financial information, and management's responsibility for the completeness and accuracy of the underlying informationCorrect
  3. CA fixed materiality threshold to be applied to the financial statements
  4. DThe accountant's undertaking to report fraud to the tax authority

Explanation

The terms must cover the nature and purpose of the engagement, the intended use and distribution, the applicable framework, and management's responsibility for the underlying information and the judgements needed to prepare the statements. Analytical procedures are review work, and no assurance materiality threshold applies in a compilation.

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