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.

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Definitions:

Surfactant

A substance that reduces surface tension between two liquids, or between a liquid and a gas, used extensively in medical treatment, especially in neonatal care to aid in breathing.

Alveoli

Tiny air sacs in the lungs where the exchange of oxygen and carbon dioxide occurs.

Sinoatrial Node

A group of cells located in the right atrium of the heart that spontaneously generates electrical impulses, acting as the heart's natural pacemaker.

Heart Rate

The number of heartbeats per minute, a vital sign indicating the heart's activity.