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

If management refuses to accept CPA's suggestions for revisions due to GAAP non-compliance, what is the CPA's next step?

1. Limit the distribution of the report

2. Issue an adverse opinion immediately

3. Request a second review of the financials

4. Describe the reasons for non-compliance in the report

The correct answer is: Describe the reasons for non-compliance in the report

In a situation where management refuses to accept a CPA's suggestions for revisions to the financial statements due to non-compliance with Generally Accepted Accounting Principles (GAAP), the CPA's obligation is to ensure that the report accurately reflects any material misstatements or departures from GAAP. By describing the reasons for non-compliance in the report, the CPA provides transparency regarding the nature of the financial statements and the implications of management's decisions. This approach allows users of the financial statements to understand the extent of the non-compliance and the related risks associated with the financial information presented. It also maintains the integrity of the audit process by documenting the CPA's assessment and the facts as they were in the financials, as well as ensuring that stakeholders are aware of any potential issues that could affect their decisions. On the other hand, limiting the distribution of the report would not adequately inform stakeholders about the issues identified. Issuing an adverse opinion immediately may be premature if the CPA has not fully documented the reasoning and if the audit process needs more communication with management first. Requesting a second review of the financials may lead to delays and does not directly address the immediate requirement to inform users about non-compliance. Thus, accurately describing the reasons for non-compliance in the