[rbozung]

Can someone please give me an overview of when Independence is 1.) required 2.) not required but required to be disclosed if their is a lack of independence 3.) not required and not required to be disclosed? I know that there are various factors such as when the report is for Prospective financial statements, Pro forma, Historical financial statements and whether it is AICPA or PCAOB standards?

I am having a really tough time keeping this all straight so a breakdown of how all these rules apply would be awesome. Thank you!

BEC - Passed
AUD - Passed
FAR - 10/28/14 (waiting results)
REG - Passed

[thechapman]

For compilations, independence is not required. However, if someone compiled blah blah blah and they were NOT independent, they would be required to disclose the lack of independence.

In short, it's not required but no disclosure basically implies independence.

Passed - 2014

[Anonymous]

Independence is required for everything except compilations. As chapman said, an auditors report always implies independence so if an auditor performs a compilation and is not independent, they have to disclose that. Other than that, it's N/A because independence is required for every other form of engagement.

[rbozung]

Thank you!

*there is a lack of independence, not their 😉 Oopsadaisy.

BEC - Passed
AUD - Passed
FAR - 10/28/14 (waiting results)
REG - Passed

[Sarah1421]

thechapman is right – independence is required when you are giving any sort of assurance (positive or limited/negative). You are also required to be independent in an agreed upon procedures engagement and other attest engagements.

A compilation is the odd-ball where lack of independence is allowed (but you have to disclose it). The ONLY other oddball I can find in my materials is a “report on the application of the requirements of an applicable financial reporting framework” – for example, a report on the application of GAAP. You also have to disclose your lack of independence in that case.

Remember, you can't compile pro formas. Only prospective and historical FS can be compiled (and fall under this rule). And I don't know about the “real world,” but my text NEVER mentions compilations of an issuer – only private companies where SSARS apply (so no PCAOB).

I believe a prospective FS compilation would fall under SSAE – can anyone say for sure?

FAR - 90
AUD - 91
BEC - 86
REG - 87

[rbozung]

Sarah, I have two questions directly from my CPA software that ask about 1) compiling Pro Forma financial statements and 2) compiling for an issuer. Please see below:

An accountant has been engaged to compile pro forma financial statements. During the accountant's acceptance procedures, it is discovered that the accountant is not independent with respect to the company. What action should the accountant take with regard to the compilation?

A. The accountant should discuss the lack of independence with legal counsel to determine whether it is appropriate to accept the engagement.

B. The accountant should disclose the lack of independence in the accountant's compilation report.

C.The accountant should withdraw from the engagement.

D. The accountant should compile the pro forma financial statements but should not provide a compilation report.

Accepting an engagement to compile a financial projection for a publicly held company most likely would be inappropriate if the projection were to be distributed to

A. A bank with which the entity is negotiating for a loan.

B. A labor union with which the entity is negotiating a contract.

C. The principal stockholder, to the exclusion of the other stockholders.

D. All stockholders of record as of the report date.

BEC - Passed
AUD - Passed
FAR - 10/28/14 (waiting results)
REG - Passed

[Sarah1421]

Question 1 – I'd say “C” – because you shouldn't compile a pro forma and I think they are trying to trick you (Do you have the Becker materials? If so, there's a quick reference table on A2-72).

Was that the correct answer? It's going to really make me mad if that's wrong. lol

Question 2 – “D” – It looks like they are trying to say that a compilation is not appropriate for an issuer unless it's restricted use (for a particular purpose). I'm guessing that would fall under SAS (like the review of an issuer that's not interim).

FAR - 90
AUD - 91
BEC - 86
REG - 87

[005]

@rbozung, I'm not 100% but I'm going to say B & D.

taken from: https://www.aicpa.org/Research/Standards/CompilationReview/DownloadableDocuments/AR-00120.pdf

page 2718

“The accountant may agree to compile pro forma financial information only if the document that contains the pro forma financial information includes (or incorporates by reference) the historical financial statements of the entity on which the pro forma financial information is based.”

BEC - ✔
REG - ✔
AUD - ✔
FAR - 11/29/14

CPAExcel, Ninja MCQs, and a sh*t ton of coffee

[Anonymous]

005, I agree. B & D.

Took the test this afternoon.

[Sarah1421]

I totally brought this up in another forum…

HELP – Why can't an auditor compile Pro Forma Financials?

I REALLY hope to hear the answer soon..

FAR - 90
AUD - 91
BEC - 86
REG - 87

[005]

@Sarah1421 my materials (CPAExcel) don't mention a compilation of Pro-Forma as well; it just mentions the “Examination” and “Review.”

hmmmmm

BEC - ✔
REG - ✔
AUD - ✔
FAR - 11/29/14

CPAExcel, Ninja MCQs, and a sh*t ton of coffee

[rbozung]

Sarah,

The answer is actually B (I just checked and my materials are cpa excel) which, by default, means that one can compile a pro forma. Don't get mad. Get even and don't miss that on the exam 🙂

005, Good luck tomorrow! I take AUD on the 11th 🙁 Just when I think that I know what I am doing, I get thrown another exception to the rule 🙁

BEC - Passed
AUD - Passed
FAR - 10/28/14 (waiting results)
REG - Passed

[005]

@rbozung thanks bud, I hope you well too

@Sarah1421 & @_Nick_, no worries, we got thisssss

BEC - ✔
REG - ✔
AUD - ✔
FAR - 11/29/14

CPAExcel, Ninja MCQs, and a sh*t ton of coffee

[Sarah1421]

Thank you so much for checking. But oh no…. I'm so mad at Becker right now. LOL

It says it on several pages… even A2-86. I've been trying to think of Pro-formas like MD&A (which you can't compile)…

I'm kinda not sure what to think…. hopefully someone with a really strong opinion speaks up!!

FAR - 90
AUD - 91
BEC - 86
REG - 87

[Anonymous]

@Sarah,

Whenever I see compilation, I assume disclose lack of independence. Not sure if it's full proof.

[Sarah1421]

_Nick_ – I bet it's safe 99% of the time… I better just stick with that. I've been obsessing about Pro Formas for a while now and I think I should give it up. lol

FAR - 90
AUD - 91
BEC - 86
REG - 87

[Author]

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