Question

Russ Major, CPA, drafted the following report on October 25, 2015 at the completion of the engagement to compile the financial statements of Ajax Company for the year ended September 30, 2015. Ajax is nonpublic organization in which Major's child has a material direct financial interest. Ajax decided to omit substantially all of the disclosures required by GAAP becasue the financial statements will be only for mangement's use. The statement of cash flows was also omitted because management does not believe it to be a useful financial statement. Identify the deficiencies contained in Major's report on the compiled financial statements. Group the deficiencies by paragraph when applicable. Do not redraft the report. To the Board of Drictors of Ajax Company: I have complied the accompanying financial statements of Ajax Company as of September 30, 2015, and for the year then ended. I planned and performed the compilation to obtain limited assurance about whether the financial statements are free of matrial misstatements. A compilation is limited to presenting information in the form of financial statements. It is substantially less in scope thatn an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. I have not audited the accompanying financial statements and, accordingly, do not express any opinion on them. Management has elected to omit substantially all of the disclosures required by generally accpeted accounting principles. If the omitted disclosures were included in the financial statements, they might influence the user's conclusions about the Company's financial position, results of operations, and changes in financial position. I am not independent with respect to Ajax Company. This lack of of independence is due to my child's ownership of a material direct financial interest in Ajax Company. This report is intended solely for the information and use of the Board of Directors and management of Ajax Company and should not be used for any other purpose.

Answer 1

Solution:

It is evident from the report that Mr. Significant CPA has been locked in to play out an accumulation and survey of records and not a review. As needs be he has assembled and settle accounts as different proclamations.

His activity was to give the budgetary explanations in the standard configurations and not to give affirmation whether the announcements are free of Financial mistakes and misquotes.

Be that as it may, as an individual from the American Institute of Certified Public Accountants,he needs to play out his assignments affirming to proficient morals.

Accordingly, Mr. Major should initially have a general comprehension of the matter of Ajax and the bookkeeping standards utilized and their money related announcing frameworks.

Next he needs to introduce the majority of the money related data in the acknowledged configurations.

The accompanying explanations are required to be readied :-

1. The Balance Sheet
2. The Income Statements
3. A statement of Retained Earnings
4. A statement of Cash flows.

These are the four fundamental arrangement explanations to be readied. Obviously Mr. Major has overlooked to show and arrange the income proclamation.

Moreover, the arrangement report neglects to state what precisely Mr. Major has finished with the records, Even aggregation must be executed according to the recommended bookkeeping guidelines, He needs to state whether the announcements arranged affirm to the endorsed measures Required by the Institute of guaranteed open bookkeepers. He needs to explicitly state whether he had the duty to review the books or just accumulation.

In spite of the fact that Mr. Real's gathering report properly expresses that the money related articulations are a portrayal of the executives and that he has not performed survey and review work, regardless he needs to arrange the majority of the required explanations and notice it in the report. Plainly even the accumulation has not been done as per the norms of Accounting as he has excluded a portion of the of the monetary proclamations.

As Mr. major has obviously expressed that it is just a gathering assignment, and not a review, he truly does not need to be independent in his methodology. Consequently there was no compelling reason to make reference to the individual relationship of his little girl having a money related enthusiasm of Ajax. A minor aggregation does not require independence.

In addition, a Compilation does not give confirmation of the genuine reasonable perspective of the announcements. Nonetheless, Mr. Major has gone on record in the opening passage to state " to get restricted confirmation whether the money related articulations are free of material Misstatements" .

To do this requires independence. How might he offer affirmation to the administration on the off chance that he isn't independent of the administration? It is conflicting.

The target of assemblage ought to be to help the administration in exhibiting the budgetary information.Mr. Major bombs in this fundamental target of gathering as he says " Management has chosen to discard generously every one of the exposures required by bookkeeping standards for the most part acknowledged in the United States Of America" .

Subsequently it might likewise be said that Mr. Major has neglected to perform proficient morals expected of a qualified bookkeeper.