Compilation Reporting. A Banker Friend and You Were Discussing Compiled Financial Statements

question 79

Essay

Compilation Reporting.
A banker friend and you were discussing compiled financial statements. He said," When CPAs associate their name with compiled financial statements, their only responsibility is to the client and that is limited to the proper summarization and presentation on the financial statement information provided by the client. The opinion clearly states that the auditor has not conducted an audit and does not express an opinion on this fair presentation. Therefore, if users rely on compiled financial statements, they do so at their own peril and can never hold the CPA responsible for inadequate performance. Users should interpret the financial statements as if they had been prepared by management.".
REQUIRED: How would you respond to your friend?

Grasp the concept of the perpetual inventory method and its application in accounting for merchandise.

Understand the function and maintenance of the accounts payable subsidiary ledger.

Comprehend the relationship and reconciliation between the accounts payable controlling account and the accounts payable subsidiary ledger.

Develop skills in preparing general journal entries for merchandise purchases, including those with freight costs and returns.

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