Question

Which of the following statements is correct?

1) CPAs performing tax and consulting services do not need to remain independent. However, CPAs performing compilations services must remain independent.
2) CPAs performing compilation services need to remain independent. As such, any lack of independence must be disclosed in the compilation report.
3) CPAs performing tax, consulting, and compilation services do not need to remain independent. However, the lack of independence must be disclosed in the compilation report.
4) CPAs performing tax, consulting, and compilation services do not need to remain independent and no disclosure is necessary.

Answer 1

The correct statement is option 2) CPAs performing compilation services need to remain independent. The lack of independence must be disclosed in the compilation report.

Step-by-step explanation:

The correct statement is option 2) CPAs performing compilation services need to remain independent. As such, any lack of independence must be disclosed in the compilation report.

In the field of accounting, independence refers to the unbiased and objective mindset of a Certified Public Accountant (CPA) when performing professional services. CPAs performing tax and consulting services do not necessarily need to remain independent, as these services are based on the expertise and knowledge of the CPA. However, when performing compilation services, CPAs must remain independent to ensure the reliability and credibility of the financial statements presented in the compilation report.

If there is any lack of independence in the performance of compilation services, such as a financial interest in the entity being compiled or personal relationships that may compromise objectivity, it must be disclosed in the compilation report to provide transparency to the users of the financial statements.