A CPA was engaged by the Alba Nursing Home to prepare, on the CPA's stationery and without audit, financial statements for \(19 \times 0\) and its \(19 \times 0\) income tax return. From the accounting and other records he learned the following information about the Nursing Home:

1. The Alba Nursing Home is a partnership that was formed early in 19X0. The Nursing Home occupies a large old mansion that stands on a sizeable piece of ground beside a busy highway. The property was purchased by the partnership from an estate that out-of-state heirs wanted to settle. The heirs were unfamiliar with the local real estate market and sold the property at the bargain price of \(\$ 10,000\) for the house and \(\$ 5,000\) for the land.

2. A few weeks after the purchase the partnership : mploved a competent independent appraisal firm that appraised the house at \(\$ 100,000\) and the land at \(\$ 50,000\).

3. The property was then written up on the partnership books to its appraisal value, and the partners' capital accounts were credited with the amount of the write-up.

4. Additional funds were invested to convert the mansion to a nursing home, to purchase the necessary equipment and sup plies, and to provide working capital.

{Required:}

a. Assume that the CPA prepared the financial statements of the Alba Nursing Home from the accounting records, placed them on his stationery, and labeled each page "Prepared Without Audit." In accordance with the client's preference, the assets were reported only at appraisal values. Under the circumstances presented, what is the CPA's responsibility, if any, to disclose the method of valuation of the assets? Discuss

b. In this situation, how does the CPA's responsibility for disclosure of the valuation basis of the assets differ, if at all, from the responsibility he would have had if he had made a typical examination of the financial statements?