Question

Which of the following is NOT a condition that must be met when a CPA is considering whether to accept a compilation engagement?

1) The CPA must have knowledge of the client's industry and accounting practices.
2) The CPA must obtain an agreement from management that it acknowledges its responsibility for the preparation and fair presentation of the financial statements in accordance with the applicable financial reporting framework.
3) The CPA must be professionally competent to perform the engagement.
4) The financial reporting framework selected by management must be cash basis accounting.

Answer 1

The condition not required for a CPA considering a compilation engagement is that the financial reporting framework must be cash basis accounting; any appropriate financial framework can be selected by management.

Step-by-step explanation:

The question pertains to the conditions that a Certified Public Accountant (CPA) must consider when deciding to accept a compilation engagement. The condition that is NOT required is "4) The financial reporting framework selected by management must be cash basis accounting." This is not a requirement because the management can choose any appropriate financial reporting framework, and it is not limited to the cash basis of accounting. Compilation engagements can be conducted under various financial reporting frameworks, including but not limited to GAAP, IFRS, or tax basis.

However, the CPA must ensure the other three conditions are met:

• The CPA must have knowledge of the client's industry and accounting practices.
• The CPA must obtain an agreement from management that it acknowledges its responsibility for the preparation and fair presentation of the financial statements in accordance with the applicable financial reporting framework.
• The CPA must be professionally competent to perform the engagement.