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

Mehta & Co., Chartered Accountants, are engaged by the management of Kiran Plastics Pvt. Ltd. to assist in preparing special purpose financial statements (a balance sheet and a Statement of Profit and Loss) for management's own internal use. The firm will not verify the information supplied. Which statement best describes the nature of this engagement and the report the firm will issue?

This is a compilation engagement under SRS 4410 (Revised). The practitioner assists management in preparing the financial statements without obtaining assurance, and the report states that the statements are for management's use only and that no audit opinion or review conclusion is expressed.

  1. AA compilation engagement under SRS 4410 (Revised), where the practitioner gives no assurance and the report states that the statements are for management's use onlyCorrect
  2. BAn audit engagement, where the practitioner gives a reasonable assurance opinion on the statements
  3. CA review engagement, where the practitioner gives a negative assurance conclusion
  4. DAn agreed-upon procedures engagement under SRS 4400, where the practitioner expresses an opinion on the statements

Explanation

SRS 4410 (Revised) deals with assisting management in preparing and presenting historical financial information without obtaining any assurance on it. The illustrative report says the statements are for the use of management only and that the practitioner expresses no audit opinion or review conclusion. Describing it as audit or review wrongly implies assurance, and SRS 4400 reports factual findings, not an opinion.

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