Audit of financial statements prepared in accordance with the special purpose framework.

 

Special purpose financial statements

Special purpose financial statements are financial statements prepared in accordance with a special purpose framework.

Special purpose framework – A financial reporting framework designed to meet the financial information needs of specific users.

Examples of special purpose frameworks are:

● A tax basis of accounting for a set of financial statements that accompany an entity’s tax return.

● The cash receipts and disbursements basis of accounting for cash flow information that an entity may be requested to prepare for creditors.

●The financial reporting provisions established by a regulator to meet the requirements of that regulator; or

●The financial reporting provisions of a contract, such as a bond indenture, a loan agreement, or a project grant.

Considerations when accepting the audit of special purpose financial statements engagement.

In an audit of special purpose financial statements, the auditor shall obtain an understanding of:

(a)     The purpose for which the financial statements are prepared.

(b)   The intended users; and

(c)    The steps taken by management to determine that the applicable financial reporting framework is acceptable in the circumstances.

Reporting considerations in relation to the audit of special purpose financial statements

When forming an opinion and reporting on special purpose financial statements, the auditor shall:

(a)    Describe the Applicable Financial Reporting Framework. In the case of financial statements prepared in accordance with the provisions of a contract, the auditor shall evaluate whether the financial statements adequately describe any significant interpretations of the contract on which the financial statements are based.

(b)   include an Emphasis of Matter paragraph alerting users of the auditor’s report that the financial statements are prepared in accordance with a special purpose framework and that, as a result, the financial statements may not be suitable for another purpose.

(c)    Adapt Management’s responsibilities and auditor’s responsibilities related to the going concern assumption. Depending on the applicable financial reporting framework used in the preparation of the special purpose financial statements, the description in the auditor’s report of management’s responsibilities relating to going concern may need to be adapted as necessary. The description in the auditor’s report of the auditor’s responsibilities may also need to be adapted as necessary.

(d)   Report Key Audit Matters (if required). For audits of special purpose financial statements requirements to communicate the KAN in an audit report only apply if it is proscribed by law or regulation or the auditor otherwise decides to communicate key audit matters.

Example of an audit report on financial statements prepared in accordance with a special purpose framework.



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