Baker, CPA, was engaged to review the financial statements of Hall Co., a nonissuer. During the engagement Baker uncovered a complex scheme involving client illegal acts and fraud that materially affect Hall's financial statements. If Baker believes that modification of the standard review report is not adequate to indicate the deficiencies in the financial statements, Baker should:

Question

Quizplus · Accepted Answer

Choice "C" is correct. If the accountant believes that modification of the standard report is not adequate to indicate the deficiencies in the financial statements taken as a whole, the accountant should withdraw from the review engagement and provide no further services with respect to those financial statements. Note that the accountant should also request that management consider the effect of the scheme on the financial statements. Choice "A" is incorrect. Since Baker believes modification of the standard report is not adequate, a disclaimer is inappropriate. Baker should withdraw from the engagement. Choices "B" and "D" are incorrect. No opinion may be given based on a review engagement

Baker, CPA, Was Engaged to Review the Financial Statements of Hall