Miller, CPA, is engaged to compile the financial statements of Web Co., a nonissuer entity, in conformity with the income tax basis of accounting. If Web's financial statements do not disclose the basis of accounting used, Miller should:

A. Issue a special report describing the effect of the incomplete presentation. B. Withdraw from the engagement and provide no further services to Web. C. Disclose the basis of accounting in the accountant’s compilation report. D. Clearly label each page "Distribution Restricted--Material Modifications Required."

C) Disclose the basis of accounting in the accountant’s compilation report.

Explanation:

Miller's accountants are not expected to perform any accounting procedures with respect to Web's financial records, they are only supposed to compile them and issue a report. But if the accountants notice some errors due to misapplications of GAAP standards or notice that some or all disclosures are missing, they should disclose the relevant information in their report.

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