Special Purpose and Other Country Frameworks

Question 1

what are types of special purpose frameworks?

Answer 1

1. cash basis: record cash receipts and disbursement
2. tax basis: basis of accounting use to file income tax return
3. Regulator basis: basis of accounting used to comply with requirements or of a regulatory agency
4. contractual basis: comply with an agreement between the entity and one or more third parties other than the auditor
5. other basis: uses a definite set of logical, reasonable criteria that is applied to all material items appearing in FS

note: names of financial statements are different for these special purpose frameworks compared to GAAP

Question 2

what is a dual opinion?

Answer 2

the auditor expresses opinion on both:
- special purpose framework
- GAAP

Question 3

what special purpose framework are referred to as other comprehensive bases of accounting (OCBOA)?

Answer 3

cash, tax, and regulatory basis

Question 4

what are phrases or wording used in dual opinion in a regulatory basis of accounting (Nonissuers)?

Answer 4

• opinion paragraph: “we have audited…
• Unmodified opinion (1st opinion): “In our opinion, the accompanying financial statements present fairly,…
• Adverse opinion (2nd opinion): “in our opinion, because of the significance of the matter discussed in the basis for Adverse opinion on the US GAAP…, the FS do not present fairly in accordance with GAAP…”
• Basis for opinion:
• Basis for Adverse opinion: basically indicate that the FS of the client entity are prepared by a regulatory agency. “which is basis of accounting other than GAAP in the US….not reasonably determinable, are presumed to be material and pervasive”

the other parts of the report are similar to a standard report

Question 5

what are two types of reporting other country frameworks?

Answer 5

1. Distribution outside the US: two reporting options (1. report complied with standards of other countries. 2. report uses US standards)
2. Distribution inside the US

Question 6

what are the wordings of report of FS prepared using other country framework (distribution outside US)?

Answer 6

• ” we have audited…as described in NOTE X to the DS, have been prepared on the basis of [specify the reporting framework in [name of country]
• “in our opinion…”

Question 7

what are the wordings of report of FS prepared using other country framework (distribution in the US)

Answer 7

• should report using US form report
• add an emphasis-of-matter paragraph. “ As discussed in NOTE X to the FS, the company prepares its FS in accordance with [specify the reporting framework] in [name of country], which differs from GAAP in the US. Our opinion is not modified with the respect to this matter.”