When an Accountant Is Not Independent of an Entity and Is

question 31

Multiple Choice

When an accountant is not independent of an entity and is requested to perform a compilation of the entity's financial statements, the accountant:

• A)is precluded from accepting the engagement.
• B)may accept the engagement and need not disclose the lack of independence.
• C)may accept the engagement, should disclose the lack of independence, and may indicate the reason for the lack of independence.
• D)may accept the engagement and must disclose both the lack of independence and the reason for the lack of independence.

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Definitions:

After Tax Profit

The net income a company retains after deducting all taxes owed to the government.

Income Tax Rate

The percentage of an individual or corporation's income that is paid to the government as tax.

Sales Mix

The proportion of different products or services that a company sells, reflecting its strategy to achieve profitability.

Fixed Costs

Costs that do not vary with the level of production or sales over a certain range and within a certain period.