During an engagement to review the financial statements of a nonpublic entity, an accountant becomes aware of a material departure from GAAP. If the accountant decides to modify the standard review report because management will not revise the financial statements, the accountant should:
A)express negative assurance on the accounting principles that do not conform with GAAP.
B)disclose the departure from GAAP in a separate paragraph of the report.
C)issue an adverse or an "except for" qualified opinion, depending on materiality.
D)express positive assurance on the accounting principles that conform with GAAP.

Question

Quizplus · Accepted Answer

The correct approach when an accountant becomes aware of a material departure from GAAP and management will not revise the financial statements is to disclose the departure from GAAP in a separate paragraph of the report. This ensures that the users of the financial statements are made aware of the non-conformity with GAAP, which could affect their decision-making.

During an Engagement to Review the Financial Statements of a Nonpublic