Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

What is the appropriate action for a CPA when asked to audit a balance sheet only without reviewing other financial statements?

1. Accept the engagement because such engagements involve special considerations in U.S. GAAS.

2. Not accept the engagement because it generates a piecemeal opinion.

3. Accept the engagement but disclaim an opinion on the other financial statements.

4. Not accept the engagement as it violates the profession's ethical standards.

The correct answer is: Accept the engagement because such engagements involve special considerations in U.S. GAAS.

Accepting the engagement to audit only the balance sheet is appropriate in this scenario because audits of individual financial statements, such as a balance sheet, are recognized practices under U.S. Generally Accepted Auditing Standards (GAAS). These standards allow for audits of specific components or elements of the financial statements as long as the auditor communicates the scope clearly, and the client understands that only the specific statement is being audited. In this case, the auditor would need to ensure that the engagement letter specifies that the audit is limited to the balance sheet, making it clear to all parties involved. While an audit of the balance sheet alone does have unique considerations, it can still provide useful information to the users of that financial statement. As long as the auditor adheres to the applicable standards and appropriately discloses the scope of the audit, the engagement can be accepted. There are implications related to piecemeal opinions and ethical standards concerning the acceptance of various engagements, but in cases where auditing standards allow for the review of individual financial statements, these concerns can be addressed when proper communication occurs with stakeholders.