True / False: Issuers can follow a special-purpose framework.
False
Issuers must follow US GAAP or IFRS
What are the 5 types of special purpose frameworks?
Cash Basis
Tax Basis
Regulatory Basis
Contractual Basis
Other Basis
What is the Contractual Basis of accounting?
The entity uses this framework to comply with an agreement between the entity and one or more third parties other than the auditor.
True / False: The same titles are used for FS prepared using GAAP vs using a special purpose framework
False
It is forbidden to use GAAP titles so as to reduce confusion.
The general title may be used as long as the special purpose framework is also identified in the title. Ex = Statement of Income - Cash Basis
What is management’s responsibility when using a special purpose framework?
Must provide a description of the special purpose framework, including a summary of significant accting policies and how the framework differs from GAAP.
Other disclosures appropriate for the special purpose framework.
If using a contractual framework, disclose any significant interpretations of the contract on which the FS are based.
Additional disclosures to achieve fair presentation.
When the entity uses the Cash Basis framework, what addl info must the auditor include in the audit report?
Opinion: Single opinion based on the Cash Basis framework
Management’s Responsibility: Modified to state it is mgmt’s resp. to determine that the reporting framework is acceptable in the circumstances
Description of Purpose: No
Emphasis-of-Matter: Yes, FS are prepared in accordance with the Cash Basis, refer to the note describing the Cash Basis, states this is other than GAAP
Other-Matter restricting use: No
When the entity uses the Tax Basis framework, what addl info must the auditor include in the audit report?
Opinion: Single opinion based on the Tax Basis framework
Management’s Responsibility: Modified to state it is mgmt’s resp. to determine that the reporting framework is acceptable in the circumstances
Description of Purpose: No
Emphasis-of-Matter: Yes, FS are prepared in accordance with the Tax Basis, refer to the note describing the Tax Basis, states this is other than GAAP
Other-Matter restricting use: No
When the entity uses the Regulatory Basis framework (not general use), what addl info must the auditor include in the audit report?
Opinion: Single opinion based on the Regulatory Basis framework
Management’s Responsibility: Modified to state it is mgmt’s resp. to determine that the reporting framework is acceptable in the circumstances
Description of Purpose: Yes
Emphasis-of-Matter: Yes, FS are prepared in accordance with the Regulatory Basis, refer to the note describing the Regulatory Basis, states this is other than GAAP
Other-Matter restricting use: Yes, restrict use to those within the entity & regulary agencies to which the entity is subject
When the entity uses the Regulatory Basis (general use) framework, what addl info must the auditor include in the audit report?
Opinion: Dual opinion based on GAAP and then the Regulatory Basis framework
Management’s Responsibility: Modified to state it is mgmt’s resp. to determine that the reporting framework is acceptable in the circumstances
Description of Purpose: Yes
Emphasis-of-Matter: No, because GAAP is reported separately
Other-Matter restricting use: No
When the entity uses the Contractual Basis framework, what addl info must the auditor include in the audit report?
Opinion: Single opinion based on the Tax Basis framework
Management’s Responsibility: Modified to state it is mgmt’s resp. to determine that the reporting framework is acceptable in the circumstances
Description of Purpose: Yes
Emphasis-of-Matter: Yes, FS are prepared in accordance with the Contractual Basis, refer to the note describing the Contractual Basis, states this is other than GAAP
Other-Matter restricting use: Yes, restrict use to those within the entity and the parties to the contract/agreement.
When the entity uses an Other Basis framework, what addl info must the auditor include in the audit report?
Opinion: Single opinion based on the Tax Basis framework
Management’s Responsibility: Modified to state it is mgmt’s resp. to determine that the reporting framework is acceptable in the circumstances
Description of Purpose: Yes, if the FS are restricted
Emphasis-of-Matter: Yes, FS are prepared in accordance with the Other Basis, refer to the note describing the Other Basis, states this is other than GAAP
Other-Matter restricting use: Yes, when warranted
True / False: Private companies must comply with GAAP
False
Cash basis is not GAAP, but is typically used by small, private companies
What bases of accounting are typically referred to as (OCBOA) Other Comprehensive Bases of Accounting?
Cash Basis
Tax Basis
Regulatory Basis
True / False: The auditor can refer to a note that describes the purpose for which the alternate basis of account was used, in place of describing the purpose in the audit report?
True
An auditor's report on special purpose financial statement should, at a minimum, include which elements?
Title
Addressee
Introductory paragraph that identifies the special purpose FS audited
Management's Responsibility
** Mgmt's responsibility to determine that the applicable financial reporting framework is acceptable
Description of the purpose for which the FS are prepared (when required)
Auditor's Responsibility
** reference to GAAS, and law/regulation (when required)
** description of the audit in accordance with those standards
** opinion on the special purpose FS
When the special purpose FS are prepared using regulatory framework for general use = Opinion on whether the special purpose FS are presented fairly, in all material respects, in accordance with GAAP
Emphasis-of-Matter (when required)
Other-Matter (when required)
Auditor's signature
City/State
Date of the auditor's report
True / False: Engagements to report on FS prepared in accordance with IFRS are conducted in accordance with the same rules that govern reporting on FS prepared in accordance with GAAP.
True
True / False: Engagements to report on FS prepared in accordance with country frameworks other than GAAP or IFRS are conducted in accordance with the same rules that govern reporting on FS prepared in accordance with GAAP/IFRS
False
Before accepting the engagement to perform an audit involving the framework of another country, the auditor must obtain which info from management?
The purpose for which the FS are prepared
The intended users of the FS
The steps taken by mgmt to determine whether the applicable financial reporting framework is acceptable
...and then determine whether the financial reporting framework is a fair presentation framework.
When performing an audit using the framework of another country, which audit framework should the auditor use?
GAAS, except another auditing framework can also be applied in addition to GAAS, such as ISA, and the audit report can adhere to their standards
What are the two reporting options for an audit involving the framework of another country?
(1) The report of the other country or ISA, provided that
** the report is typically issued using that format
** the auditor has obtained sufficient evidence to support the statements required in the report
** the auditor has complied with the reporting standards of the other country, and has identified that country in the report
(2) use the typical GAAS report framework, except identify the other country's financial reporting framework.
Define Continuing Accountant
An accountant who has been engaged to report on the financial statements of a specific entity.
Define Reporting Accountant
An accountant in public practice, other than the continuing accountant, who provides either a report or advice on,
(1) the type of report that may be rendered on a specific entity's FS
(2) the application of an applicable financial reporting framework to a specific transaction
True / False: The reporting accountant must also be independent of the entity
False
True / False: The reporting accountant must render a determination on either the type of report or financial reporting framework independent of and without consulting with the continuing accountant.
False
The reporting consultant is expected to consult with the continuing accountant and, if not, must document the rationale for not doing so.
What are the contents of the Reporting Accountant's report?
Addressee to the requesting party
Description of the nature of the engagement
Statement that the engagement was performed in accordance with AICPA or PCAOB standards
Identification of the requesting entity
Description of the transaction(s) in question, including relevant facts/circumstances and the source of the info
Statement describing the appropriate financial reporting framework, its country of origin, its application, and the reasons why
That the preparers of the FS are responsible for proper accounting treatment and should consult with their continuing accountants
Statement that any differences presented may change the report
Paragraph restricting use of this report to specified parties
(if applicable) lack of independence
When the content of the auditor's report is prescribed by law or regulation, when might the auditor choose to modify the report?
When any of the following issues are involved:
** lack of consistency
** going concern
** other auditor
** emphasis-of-matter
True / False: The reporting accountant can report on the application of accounting principles to a hypothetical future transaction
True
As long as the transaction involves the facts and circumstances of a specific entity
Author
BethM
ID
332164
Card Set
AUD 1.12 - Special Purpose & Other Country Frameworks
