F/S with Special Purpose Frameworks

Question 1

Define special purpose framework?

Answer 1

A financial reporting framework other than GAAP that is one of the following bases of accounting

1) Cash basis
2) Tax basis
3) regulatory basis
4) Contractual basis

Question 2

When presented with an engagement that will be reported under a special purpose framework, the auditors should…?

Answer 2

Obtain an understanding of

1) Purpose for which the F/S will be prepared
2) Intended users
3) steps taken by management to determine the applicable financial reporting framework

Ensure that management understands their responsibility to disclose

Question 3

T/F: The audit report should include an emphasis of matter paragraph called “basis of accounting”?

Answer 3

TRUE- There must be a emphasis of matter paragraph after the opinion.

Question 4

What should be included in the basis of opinion paragraph?

Answer 4

• Mentions a special purpose framework was used
• Refer to the note describing the basis of accounting
• Point out that the basis is other than GAAP

Question 5

An other matter paragraph should be included when using a special purpose framework? if so, what needs to be stated?

Answer 5

TRUE

Should restrict the report to certain users

Question 6

T/F: If the financial statements are prepared on a regulatory basis AND is used for general purposes, NEITHER the “other matter” or “emphasis of matter” paragraph are required!?

Answer 6

TRUE- Neither are required under this circumstance