Clark, CPA, Compiled and Properly Reported on the Financial Statements

question 726

Multiple Choice

Clark, CPA, compiled and properly reported on the financial statements of Green Co., a nonissuer, for the year ended March 31, 20X1. These financial statements omitted substantially all disclosures required by generally accepted accounting principles (GAAP) . Green asked Clark to compile the statements for the year ended March 31, 20X2, and to include all GAAP disclosures for the 20X2 statements only, but otherwise present both years' financial statements in comparative form. What is Clark's responsibility concerning the proposed engagement?

• A) Clark may not report on the comparative financial statements because the 20X1 statements are not comparable to the 20X2 statements that include the GAAP disclosures.
• B) Clark may report on the comparative financial statements provided the 20X1 statements do not contain any obvious material misstatements.
• C) Clark may report on the comparative financial statements provided an explanatory paragraph is added to Clark's report on the comparative financial statements.
• D) Clark may report on the comparative financial statements provided Clark updates the report on the 20X1 statements that do not include the GAAP disclosures.

---

Definitions:

Proposition

An assertion that outlines an opinion or judgment.

Venn Diagram

A diagram representing mathematical or logical sets pictorially as circles or closed curves within an enclosing rectangle (the universal set), with all possible logical relations between them.

Universal Proposition

A type of categorical proposition that makes a claim about all members of a particular category, e.g., "All S are P".

Venn Diagram

A graphical representation using circles to depict sets and how they interrelate via overlapping and distancing.