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CA Final Advanced Auditing and Professional Ethics, Paper 3, Chapter 1, Part 6 of 7 CA. Siddharth Agarwal
CA Final Advanced Auditing and Professional Ethics, Paper 3, Chapter 1, Part 6 of 7
CA. Siddharth Agarwal
To understand the Standards on Auditing conceptually.
To be able to apply the knowledge acquired in solving practical cases in exam.
800-899 Specialized Areas
SA 800 Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks
SA 805 Special Considerations - Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial Statement
SA 810 Engagements to Report on Summary Financial Statements
• Special Purpose Financial Statements Scope
• Special purpose financial statements (SPFS) • Special purpose financial reporting
framework (SPFRF) Definitions
• Special points to be considered by the Auditor Special Points
• Forming an Opinion & Reporting Considerations
Reporting Considerations
The Standards on Auditing (SAs) in the 100-700 series apply to an audit of financial statements. This SA deals with special considerations in the application of those SAs to an audit of financial statements prepared in accordance with a special purpose framework.
Special purpose financial statements – 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. The financial reporting framework may be a fair presentation framework or a compliance framework.
The financial reporting provisions established by a regulator [SEC] (Securities Exchange Commission) to meet the requirements of that regulator; or
The financial reporting provisions of a contract, such as a Debenture Trust deed, loan agreement, or a project grant.
The financial reporting provisions for a merger or amalgamation.
• Materiality may be different. 1 • TCWG may not have a responsibility to oversee SPFS, so
communicating the matters with TCWG as per SA 260 may not be possible in general. 2
• It will change the written representations to be obtained from the management. 3
• The requirements of the Special Purpose Financial Reporting Framework may be significantly different from the Accounting Standards. 4
(1) Apply SA 700(R).
(2) Also include the following in the Audit Report: • Describe the purpose for which FS are prepared &
intended users. • Evaluate whether FS adequately describe the FRF
applied in the Notes on Accounts. • Include Emphasis of Matter paragraph to alert users
regarding • application of special purpose FRF • FS may not be suitable for another purpose.
• SINGLE FINANCIAL STATEMENT Meaning
• Why it is not practicable to audit SFS if you are not also engaged to audit complete FS
Accepting the Engagement
• Special Considerations on Audit of Single FS or specific items. Special Points
• Forming an Opinion & Reporting Considerations
Reporting Considerations
A single financial statement (for example, a cash flow statement) or a specific element of a financial statement (for example, cash and bank balances) including the related notes. The related notes ordinarily comprise a summary of significant accounting policies and other explanatory information relevant to the financial statement or to the element.
Why it is not practicable to audit SFS if you are not also engaged to audit complete FS:
• The auditor often does not have the same understanding of the entity and its
environment, including its internal control, as an auditor who also audits the entity’s complete set of financial
statements.
• The auditor also does not have the audit evidence about the general quality
of the accounting records or other accounting information that would be
acquired in an audit of the entity’s complete set of financial statements.
If auditor not also engaged to audit the complete FS, consider the practicability of audit of SFS in accordance
with SAs.
When auditing Single FS in conjunction with full FS, audit evidence obtained as part of audit of full FS may be useful but auditor nevertheless needs to plan & perform audit of Single FS to obtain SAAE.
Materiality of Single FS < materiality for full FS
If also engaged to report on full FS, express separate opinion on each engagement.
If it is necessary to issue Adverse opinion / Disclaimer of Opinion on FULL FS, then unmodified opinion on SFS cannot be expressed.
(1) Apply SA 700(R).
(2) Also include the following in the Audit Report: • Describe the intended users for whom Single FS have
been prepared. • Evaluate whether FS adequately describe the FRF
applied in preparing Single FS in the Notes on Accounts.
• Include Emphasis of Matter paragraph.
• SUMMARY FINANCIAL STATEMENT Meaning
• Why it is not practicable to audit Summary FS if you are not also engaged to audit complete FS
Accepting the Engagement
• Criteria for preparing Summary financial statements Criteria
• What extra points should be stated in the Report on Summary FS?
Reporting Responsibilities
Historical financial information that is derived from financial statements but that contains less detail than the financial statements, while still providing a structured representation consistent with that provided by the financial statements of the entity’s economic resources or obligations at a point in time or the changes therein for a period of time.
Why it is not practicable to audit Summary FS if you are not also engaged to audit complete FS
• The auditor often does not have the same understanding of the entity and its
environment, including its internal control, as an auditor who also audits the entity’s complete set of financial
statements.
• The auditor also does not have the audit evidence about the general quality
of the accounting records or other accounting information that would be
acquired in an audit of the entity’s complete set of financial statements.
If auditor not also engaged to audit the complete FS, then he should not accept audit of Summary FS.
Either it is laid down by the Regulator or it is developed by the management. Here the main responsibility of the auditor is to check whether the Summary financial statements complies with CRITERIA or not.
He is not supposed to carry out the main audit procedures as he has already done the same at the time of auditing complete detailed FS.
He relies on the audited FS and checks whether the Summary FS have been prepared as per the laid criteria or not.
Date the report on the SFS should not be earlier than the Date of report on the audited FS.
A statement indicating that SFS do not contain all the disclosures required by FRF applied in the preparation of audited FS, and that reading SFS is not a substitute for reading the audited FS.
The audit report on the Summary FS is usually accompanied by the Audit Report on the detailed FS and the audit report on the Summary FS should refer to the Audit Report on the detailed FS.
800-899 Specialized Areas
SA 800 Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks
SA 805 Special Considerations - Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial Statement
SA 810 Engagements to Report on Summary Financial Statements
