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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Specific assignments

Brandt & Lee, the auditor of Halo Retail, is asked by Halo's management to compile its annual financial information from the accounting records under ISRS 4410, with no assurance. Management also asks that the compiled statements carry a statement that they have been 'audited'. How should the firm respond?

The firm should refuse to describe the statements as audited. A compilation engagement involves collecting, classifying and summarising management's information without verifying it, so no assurance is given. Calling it audited would mislead users, and the compilation report must state that no opinion or conclusion is expressed.

  1. AAgree, because compilation involves reviewing the figures to a level equivalent to an audit
  2. BAgree, provided the wording 'audited' is placed only on the cover page and not in the compilation report
  3. CAgree, provided the directors sign a representation letter confirming the accuracy of the figures
  4. DDecline to use the word 'audited', as a compilation engagement provides no assurance and the report must make clear that no assurance is expressedCorrect

Explanation

In a compilation, the practitioner uses accounting expertise to collect, classify and summarise information, but does not verify it, so no assurance is given. Describing it as audited would mislead users about the assurance obtained. The report must state clearly that no opinion or conclusion is expressed.

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