Special Purpose and Other Country Framework A1 M11 Flashcards
What goes in the auditor opinion reports of OCBOA?
- Would not indicate whether the method of accounting used is appropriate.
- Would include an opinion if the financial statements are presented fairly in conformity with the other comprehensive basis of accounting. (OCBOA)
- Would include a reference to the note to the financial statements that describes the basis of presentation.
- Should include an emphasis-of-matter paragraph that states that the special purpose framework is a basis of accounting other than GAAP.
- The title of the OCBOA report should be “Independent Auditor’s Report.”
OCBOA (Other Comprehensive Basis of Accounting)
What goes in the auditor’s report on financials presented in the cash basis of accounting (OCBOA)
- Should include, in the auditor’s responsibility paragraph, a statement that the audit was conducted in accordance with generally accepted auditing standards (GAAS).
- Includes positive assurance, regarding whether the financial statements are presented fairly in conformity with the Cash Basis of Accounting (OCBOA).
- Include an emphasis-of-matter paragraph, but it does not provide an explanation of the Cash-Basis of Accounting (OCBOA). Instead, it refers to the note that discusses the Cash -Basis of accounting.
Of all of the 5 OCBOA methods, which 2 have differences in reporting and what are they?
Contractual and Regulatory Basis “Single Opinion”
- The report may describe the applicable financial reporting framework to be applied.
- Required to use other matter paragraph for restricted use by stating that the financial statements may not be suitable for any purpose other than the stated purpose. This would also be included in the Emphasis-of- the- Matter paragraph.
- Description of the purpose for which the special purpose FS are prepared.
What are some OCBOA titles vs. GAAP titles for statements of revenues and Expenses?
Other comprehensive basis of accounting (OCBOA)
OCBOA financial statements include financial statements prepared in accordance with a regulatory basis of accounting.
* “Statement of income-regulatory basis.”
U.S. GAAP
* “Statement of Operations” or “The income statement”
* “The statement of activities” is the title used for a not-for-profit organization’s
Other US GAAP Titles for other reports:
* Balance Sheet
* Cash Flows
What happens if improper titles in the financials are used?
Financial statements prepared in accordance with a comprehensive basis of accounting (OCBOA) other than GAAP that are not suitably titled require a qualified opinion
What are the 3 different types of reporting frameworks?
General Purpose Frameworks
- Generally Accepted Accounting Principles (GAAP) (the standards promulgated by the Financial Accounting Standards Board FASB)
- International Financial Reporting Standards Board (IFRS) (the standards promulgated by the International Accounting Standards Board)
Special Purpose Framework
- Other Comprehensive Basis of Accounting (OCBOA) include:
* Cash Basis and Modified Cash Basis
* Tax Basis (Any titles above modified - Tax Basis)
* Regulatory Basis (Any titles above modified - Regulatory Basis) “Single Opinion”
* Contractual basis
* Other basis
When reporting on a specific, proposed, future transaction what are the responsibilities of the reporting accountant? (non-issuers only)
- While planning a reporting accountant should obtain an understanding of the form and substance of the specific transaction.
- May report on the application of the requirements of an applicable financial reporting framework to a proposed future transaction as long as the transaction involves the facts and circumstances of a specific entity.
- A reporting accountant is prohibited from providing a report on the application of the requirements of an applicable financial reporting framework to “hypothetical transactions,”.
- The reporting CPA should consult with the continuing CPA to obtain information relevant to the transaction. If the reporting accountant decides it is unnecessary to consult with the continuing accountant, then he or she must document the reasons for not consulting.
When reporting on a specific, proposed, future transaction what should be reported in the Accountant’s Report?
The reporting accountant’s written report:
- Generally, the report would be addressed to the requesting party (e.g., management, the board of directors, etc.)
- should include an identification of the specific entity involved
- a brief description of the nature of the engagement
- a statement that the engagement was performed in accordance with AICPA standards
- a description of the specific transaction(s)
- a statement of the relevant facts, circumstances, assumptions and source of the information
- a statement describing the appropriate application of the requirements of the applicable financial reporting framework to the specific transaction or type of report
- a statement that the preparers of the financial statements are responsible for proper accounting treatment
- a statement that any difference in facts, circumstances or assumptions presented may change the report
- a other-matter paragraph restricting its use to specified parties
- a statement indicating that the reporting accountant is not independent (if appropriate).
What should the U.S. Auditor do when the client prepares its reports using a financial framework in another country?
- If the report is intended also for U.S. use, the U.S. style modified report containing an emphasis of the matter paragraph, or the other country framework used.
- Use other country framework (distributed outside the U.S. only)
- The auditor need not disclaim an opinion.
When to restrict the use of an auditor report?
- A report on a client’s compliance with a regulatory requirement (assuming the report is prepared based on a complete set of audited financial statements).
- OCBOA regulatory or contractual basis.
- Report is for a specific party only
What are the different types of assurance issued by each report?
- reasonable assurance issued by the AUD Report
- No Assurance in a SSAE’s
- Limited Assurance issued by SSARS
- When is Negative assurance issued? Issuing report on management’s compliance only if the auditor has issued a unqualified or qualified opinion on the financials
