An accountant has been engaged to prepare a nonpublic client's financial statements.While preparing the financial statements,the accountant finds a number of material misstatements related to journal entries.The client refuses to correct the misstatements.Which of the following is correct?
A)A report with an adverse opinion should be issued.
B)All regulatory agencies should immediately be notified.
C)The accountant should prepare the financial statements and present them using the misstated journal entries.
D)The accountant should withdraw from the engagement.

Question

Quizplus · Accepted Answer

According to the AICPA's Code of Professional Conduct, if a client refuses to correct material misstatements, the accountant should withdraw from the engagement. Issuing an adverse opinion (choice A) would be appropriate if the misstatements are material and pervasive, but should only be done if the client refuses to correct them. Notifying regulatory agencies (choice B) is not necessary in this situation, as it is not a regulatory matter. Presenting the financial statements with the misstated journal entries (choice C) would be unethical and violate the accountant's responsibility to provide accurate and reliable financial information.

An Accountant Has Been Engaged to Prepare a Nonpublic Client's