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

Quill & Associates is compiling statements for Harbour Textiles Ltd. Partway through, the managing director asks the accountant to omit a significant related-party loan from the compiled statements because it 'confuses lenders'. The framework requires its disclosure. Management refuses to change its position after discussion. Which response is most consistent with ISRS 4410 (Revised) and the IESBA Code?

The accountant should withdraw if association with misleading statements cannot be avoided, and consider legal and ethical responsibilities. A compilation contains no opinion to modify, and the IESBA Code's integrity principle prohibits being knowingly associated with misleading information.

  1. AComplete the compilation and add a modified opinion paragraph on the disclosure
  2. BComplete the compilation but state in the report that disclosure was omitted at management's request, and still issue it without further consideration
  3. CPerform an audit of the loan to establish the correct disclosure and then finish the compilation
  4. DWithdraw from the engagement if the accountant cannot prevent association with misleading statements, and consider legal and ethical obligationsCorrect

Explanation

If management does not correct the omission and the accountant cannot avoid being associated with misleading information, ISRS 4410 requires withdrawal where possible, with consideration of professional and legal responsibilities. This is consistent with the IESBA integrity principle and the rule against association with misleading information. Option 0 is wrong because compilations contain no opinion, and option 1 allows association with misleading statements.

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