Stephanie Biggs, Chartered Professional Accountant, has compiled the financial statements for her sister's pharmacy business since it started four years ago. The financial statements are attached to the pharmacy's corporate tax return, and are also provided to the company's banker to support the company's operating credit line. The banker has been satisfied with receiving tax-based financial statements compiled by Stephanie.
REQUIRED
a. What modifications, if any, must Stephanie make to her compilation report?
b. Assume that, in the fifth year, Stephanie's sister decides to increase her bank credit line to renovate the pharmacy store and stock an expanded product line. To approve the higher credit line, the banker now requires financial statements prepared in accordance with GAAP. What actions must Stephanie take under these new circumstances? How would these requirements differ if Stephanie was not related to the pharmacy's owner?