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John Selwood’s Q&As

Subsidiary company audit exemption, the provision of non-audit services to audit exempt companies, and preparing your own accounts can prompt some challenging technical, procedural and ethical questions.

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Q: The directors of an audit exempt property investment company have refused to revalue the properties as required by the Financial Reporting Standard for Smaller Entities (FRSSE). I have made my view clear to the directors that this is not an acceptable accounting treatment but they insist that nobody is served by revaluing the properties. As I am not the auditor, can I attach my compilation report to the financial statements with a qualification, setting out my disagreement?

A: Following the changes to audit exemption in 2012, where virtually all small companies became eligible for audit exemption, there are many property investment companies that are newly audit-exempt.

Compilation reports express no opinion so there is nothing to qualify. Compilation, or accounts preparation engagements as they are sometimes called, are not assurance engagements so it is not appropriate to express an opinion…

This is an extract from an article in the March 2014 edition of Audit & Beyond, the magazine of the Audit and Assurance Faculty.

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