During a review of the financial statements of a nonpublic entity, the CPA finds that the financial statements contain a material departure from generally accepted accounting principles. If management refuses to correct the problem, the CPA should:
A)disclose the departure in a separate paragraph of the report.
B)issue an adverse opinion.
C)attach a footnote explaining the effects of the departure.
D)issue a compilation report.

Question

Quizplus · Accepted Answer

Disclosing the departure in a separate paragraph of the report allows the CPA to alert users of the financial statements to the material departure from generally accepted accounting principles (GAAP) when management refuses to correct the issue. This approach maintains the integrity of the CPA's report by clearly communicating the issue to the financial statement users.

During a Review of the Financial Statements of a Nonpublic