Page 230 - CA Final PARAM Digital Book.

Part 2 SA 4410

New Course – (SM23)
QNO Ethical Requirements & Independence in Compilation Engagement
4410.100 TITANIUM CNO-- SRS 4410.020

A Chartered Accountant is offered appointment for a compilation engagement to be performed under SRS
4410. Is he required to comply with ethical requirements of Code of Ethics? Discuss briefly
Answer Compliance with Code of Ethics: The auditor should comply with the Code of Ethics, issued by the Institute
of Chartered Accountants of India. The ethical principles governing the auditor’s professional
responsibilities.
for this type of engagement include integrity, objectivity, professional competence and due care,
confidentiality, professional conduct, and technical standards.

Independence Not a Requirement: Independence is not a requirement for agreed-upon procedures
engagement. However, the terms or objective of the engagement may require the auditor to comply with
the independence requirements of the Code of Ethics.

Statement on Lack of Independence: Where the auditor is not independent, a statement to that effect
should be made in the report of factual findings.

QNO Purposes of “compilation engagement” New Course – (SM23)
4410.200 TITANIUM CNO-- SRS 4410.020

List out few intended purposes of a “compilation engagement.
Answer Mandatory periodic financial reporting: Financial information that is the subject of a compilation
engagement may be required for various purposes including to comply with mandatory periodic financial
reporting requirements established in law or regulation, if any.

Other Purposes: Financial information may also be required for purposes unrelated to mandatory financial
reporting under relevant law or regulation, including for example,

• For internal use: For management or those charged with governance, prepared on a basis
appropriate for their particular purposes (such as preparation of financial information for internal
use).
• For external parties: The information can be used for periodic financial reporting undertaken for
external parties under a contract or other form of agreement, such as financial information provided
to a funding body to support provision or continuation of a grant.
• • Transactional Purposes: It may also be used for transactional purposes, for example to support a
transaction involving changes to the entity’s ownership or financing structure, such as for a merger
or acquisition.

QNO Inaccurate Accounting Treatment New Course – (SM23)
4410.300 TITANIUM CNO-- SRS 4410.060
During the course of performing a compilation engagement in accordance with SRS 4410, it becomes
known to you that client had suffered a theft loss of ₹ 100 lacs of its inventories over a period of time at a
storage location visited infrequently. A claim was lodged by the client with insurance company which was
repudiated due to certain technical reasons relating to coverage of policy. The client has not preferred a
complaint or an appeal against said repudiation. The amount is reflected under the head “current assets”
in trial balance of the client. Discuss, how you should proceed to deal with the matter?
Answer In this instant case, amount of ₹ 100 lacs is reflected under the head “current assets” in trial balance. Since
client’s claim has been repudiated and no appeal has been preferred, it is a loss for the client and should be

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