During a review engagement,CA discovers that the gross margin has increased by 20% over the last few years.To avoid potential liability due to possibly misstated financial statements,what should CA do?

Question

Quizplus · Accepted Answer

In a review engagement, the CA is required to obtain sufficient evidence to provide limited assurance that the financial statements are free from material misstatement. If the CA identifies a significant issue, such as a 20% increase in gross margin, they should obtain additional information to either correct or substantiate the figure. Simply correcting the figure to be consistent with prior years without any additional evidence would not be appropriate. No additional work is required for review engagements, but in this case, the CA has identified a potential issue and should take appropriate steps to address it. Downgrading the assignment to a compilation would not be appropriate or necessary based on this one issue.

During a Review Engagement,CA Discovers That the Gross Margin Has