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

What should a CPA include when preparing a report related to a financial reporting framework for a transaction?

1. Responsibility rests with the financial statement preparers.

2. The evaluation is hypothetical and may be used for opinion-shopping.

3. The guidance is for management use only.

4. The engagement was performed per Accounting and Review Services standards.

The correct answer is: Responsibility rests with the financial statement preparers.

When preparing a report related to a financial reporting framework for a transaction, it is essential for the CPA to recognize that the ultimate responsibility for the preparation and presentation of financial statements lies with the financial statement preparers. This includes ensuring that the financial statements are in accordance with the relevant financial reporting framework. By including this point in the report, the CPA clarifies the delineation of responsibilities, emphasizing that while the CPA may provide assurance through an audit or review, the preparers are accountable for the accuracy and completeness of the financial information. This understanding is critical in establishing the scope and limitations of the CPA's work. It sets a clear expectation for all parties involved regarding who is responsible for the figures presented and how the CPA's findings relate to the work performed. This responsibility does not diminish the importance of the CPA's role, but rather defines it within the context of the financial reporting process. The other choices either misrepresent the scope of the CPA's role or are not entirely aligned with the consistent practices outlined in standards for auditing and review services. For example, while understanding the context of the guidance provided to management is important, it does not negate the fundamental principle that the preparers bear the responsibility for the financial statements.