Moritz & Co – Mar 2020 Question 3b

Dear tutor,

Below is the extract from ACCA answer. In the last sentence, is it recommending compilation engagement (to prepare share prospectus and to provide accountant report) as an action to be taken?

“Share prospectus
Moritz & Co has been asked to assist in the preparation of the share prospectus document and to provide an accountant’s report on financial data, business risks and a business plan which recommends the shares to investors. Performance of these services for Beaufort Co would create an advocacy threat for the auditor. The advocacy threat arises because the auditor is effectively being asked to promote and represent their client’s position to the point where the auditor’s objectivity is compromised. The Code prohibits an auditor from acting in this way for an audit client and Moritz & Co should politely decline to assist in the preparation of the document and to endorse the recommendation to investors to purchase the shares. It may be possible, however, for the auditor to provide an accountant’s report on some elements of the prospectus. Moritz & Co may be able to provide an opinion on the financial information if, for example, it limits the form of opinion to stating that it has been properly compiled on the basis stated within the document and that this basis is consistent with the accounting policies of the company.”