The following list describes seven situations Certified Accountants may encounter, or contentions they may have to deal with, in their association with and preparation of unaudited financial statements. Briefly discuss the extent of the certified accountant’s responsibilities and, if appropriate, the actions they should take to minimise any misunderstandings.

A. Armando Almonza, CPA, was engaged by telephone to perform accounting work including the compilation of financial statements. The client believes that Almonza has been engaged to audit the financial statements and will examine the records accordingly.

B. A group of investors who own a farm that is managed by an independent agent engage An Nguyen, CPA, to compile quarterly unaudited financial statements for them. Nguyen prepares the financial statements from information given to her by the independent agent. Subsequently, the investors find the statements were inaccurate because their independent agent was embezzling funds. They refuse to pay Nguyen’s fees and blame her for allowing the situation to go undetected, contending that the CPA should not have relied on representations from the independent agent. 

C. In comparing the trial balance with the general ledger, Thynie Pukprayura, CPA, finds an account labelled Audit Fees in which the client has accumulated his CPA firm’s quarterly billings for accounting services including the compilation of quarterly unaudited financial statements.

D. Unaudited financial statements for a public company were accompanied by the following letter of transmittal from Franz Ravel, Expert Comptable:

E. To determine appropriate account classification, Jose Torres, CP Titulado, examined a number of the client’s invoices. He noted in his working papers that some invoices were missing, but did nothing further because it was felt that the invoices did not affect the unaudited financial statements he was compiling. When the client subsequently discovered that invoices were missing, he contended that the Torres should not have ignored the missing invoices when compiling the financial statements and had a responsibility to at least inform him that they were missing.

F. Omar El Qasaria, CA compiled a draft of unaudited financial statements from the client’s records. While reviewing this draft with his client, El Qasaria learned that the land and building were recorded at appraisal value. 

G. Tomoko Nakagawa, CPA, is engaged to compile the financial statements of a nonpublic company. During the engagement, Nakagawa learns of several items for which IFRS would require adjustments of the statements and note disclosure. The controller agrees to make the recommended adjustments to the statements, but says that she is not going to add the notes because the statements are unaudited.