A2 Flashcards
Special Purpose Frameworks
- cash basis
- tax basis
- regulatory basis
- contractual basis
Addition to SAS 127 for Special Purpose Frameworks
*any basis that uses a definite set of logical, reasonable criteria that is applied to all material items appearing in the financial statements
OCBOA
Other Comprehensive Bases Of Accounting
Additional Requirements for the Auditor for OCBOAs
- obtain an understanding of:
* *the purpose
* *the intended users
* *the steps taken by management to determine that the applicable financial reporting framework is acceptable - obtain the agreement of management that it acknowledges and understands its responsibility
- obtain an understanding of any significant interpretations of the contract that management made in preparing the statements
Auditor’s Report Requirements on Special Purpose Financial Statements
- describe the purpose of the financial statements (not for cash or tax)
- use non-GAAP titles
- management responsibility (determining applicable framework)
- emphasis-of-matter (except for regulatory intended for general use)
* *describes the framework used and that it is non-GAAP - other-matter paragraph (except for regulatory intended for general use)
* *restrict use of: contractual and regulatory
Regulatory Basis Financial Statements Intended for General Use
express opinion on:
- fairly presented in all material respects, in accordance with GAAP
- prepared in accordance with the special purpose framework
Auditor’s Report Prescribed by Law or Regulation
*if it is unacceptable, the auditor should reword it or attach a separate report
Opinion Paragraph for Special Purpose Financial Statements
*fair on “that” basis
Describing the other basis of accounting
*must do so in a Basis of Accounting paragraph after the opinion where the other method is specifically mentioned
Special Types of Reports for Regulatory intended for General Use
*can have two different opinions (one for each framework)
Ways to Audit Single Financial Statements and/or Specific Elements
- separate engagement
2. while doing the audit
Specific Elements, Accounts, or Items of a Financial Statement Listed
- accounts receivable, allowance for doubtful accounts, inventory, recorded value of intangibles
- schedule of disbursements regarding a lease property
- schedule of profit participation or employee bonuses
Acceptability of the Financial Reporting Framework
- purpose for individual item
- intended users
- steps taken by management to determine that the applicable financial reporting framework is acceptable in the circumstances
Audit Procedures for Single Financial Statement or Item
*can perform additional procedures and rely on the audit if one was conducted
Materiality for Single Financial Statement or Item
*materiality is for the given circumstance
Important Steps for Auditors when Reporting on Complete Set of Financials and a Specific Element
- issue a separate opinion for each item
2. indicate in the separate report the nature of the opinion expressed on the whole statements
Modified Opinion on Complete Set of Financials and Effect on Specific Report
- express adverse (GAAP)
- express disclaimer (GAAS)
* ability to express piecemeal opinion
Piecemeal Opinion with Modified Opinion on Complete Set of Financials and Effect on Specific Report
only if:
- not published or accompany report on complete set
- not constitute a major portion of the complete financials
What to do if the set of financial statements contain an emphasis-of-matter paragraph and you are expressing an opinion on one statement or item
*add a similar emphasis-of-matter to the report on the single statement or element
Reporting on an Incomplete Presentation that is Otherwise in Accordance with GAAP for Specific Statement or Element
- include an emphasis-of-matter paragraph that identifies:
* *purpose for which the presentation is prepared
* *indicates that presentation is not intended to be a complete presentation
Compliance with Contractual or Regulatory Requirements Related to Audited Financial Statements
- auditor MUST have audited the client’s financials
- can only give negative assurance
- cannot give negative assurance with adverse or disclaimer
Report on Compliance
Option 1. Separate report
**negative assurance
**description of instances of noncompliance
**RESTRICTS USE
Option 2. Report Included in Auditor’s Report
**other-matter paragraph
**negative assurance
**description of instances of noncompliance
**RESTRICTS USE
Engagements to Report on Summary Financial Statements
- auditor MUST have audited the client’s financials
- evaluate whether the statements adequately disclose their summarized nature
- if not accompanied by the financials statements, must describe where and if the audited statements are available
Form of Opinion for Engagements to Report on Summary Financial Statements
- no qualified
* unmodified or adverse ONLY