CA Final · Advanced Auditing, Assurance and Professional Ethics · Related Services
Sundaram & Co., a CA firm, has issued a compilation report for the management of Aarav Textiles Ltd. on special purpose financial statements meant only for management's own use. The managing director now asks the firm to circulate the same report to the company's bankers along with the statements. Which is the correct position for the firm?
The firm should decline. The compilation report for statements prepared for management's own purposes is intended solely for management's use and should not be distributed to other parties. Giving it to bankers would go against the stated restriction on distribution and use of the report.
- AAllow circulation, because a compilation report is always meant for all stakeholders once issued
- BAllow circulation, provided the firm states in the report that it has verified the accuracy of the information
- CAllow circulation, provided the firm converts the report into an audit opinion on the statements
- DDecline, because the report states that it is intended solely for management's use and should not be distributed to other partiesCorrect
Explanation
The illustrative compilation report for management-use statements says the report is intended solely for use by management and should not be distributed to other parties. Verifying accuracy is not required in a compilation engagement, and converting to an audit opinion would change the engagement.
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