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CA Final · Advanced Auditing, Assurance and Professional Ethics · Related Services

CA Rohan compiled financial statements for Kaveri Foods Ltd for management's own purposes, using a special purpose framework. The company's CFO now asks him to add a line to the compilation report stating that the statements give a true and fair view, so that a bank can rely on them. What is the appropriate conclusion?

Rohan should decline. A compilation engagement is not an assurance engagement, so the report expresses no audit opinion or review conclusion. The illustrative report is also intended solely for management and should not be distributed to other parties. Adding a true and fair statement for the bank would contradict both features.

  1. ARohan may add the statement because the statements incorporate accruals
  2. BRohan may add it if the CFO signs a representation accepting responsibility
  3. CRohan should decline, because a compilation report expresses no audit opinion or review conclusion and its use is restricted to managementCorrect
  4. DRohan may add it provided the report is also circulated to the bank

Explanation

The illustrative compilation report states that a compilation is not an assurance engagement and that the practitioner does not express an audit opinion or a review conclusion. It also says the report is intended solely for management and should not be distributed to other parties. A true and fair statement and circulation to the bank would contradict both. A management representation does not change the nature of the engagement.

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