ASA 805

The Australian Standards on Auditing in the 100–700 series apply to an audit of a financial report and are to be adapted as necessary in the circumstances when applied to audits of other historical financial information.  This Auditing Standard deals with special considerations in the application of those Australian Auditing Standards to an audit of a single financial statement or of a specific element, account or item of a financial statement.  The single financial statement or the specific element, account or item of a financial statement may be prepared in accordance with a general or special purpose framework.  If prepared in accordance with a special purpose framework, ASA 800^[1] also applies to the audit.  (Ref: Para. A1–A4)

This Auditing Standard does not apply to the report of a component auditor, issued as a result of work performed on the financial information of a component at the request of a group engagement team for purposes of an audit of a group financial report (see ASA 600).^[2]

This Auditing Standard does not override the requirements of the other Australian Auditing Standards; nor does it purport to deal with all special considerations that may be relevant in the circumstances of the engagement.

[Deleted by the AUASB.  Refer Aus 0.3]

Application of Australian Auditing Standards

ASA 200 requires the auditor to comply with all Australian Auditing Standards relevant to the audit.^[3]  In the case of an audit of a single financial statement or of a specific element of a financial statement, this requirement applies irrespective of whether the auditor is also engaged to audit the entity’s financial report.  If the auditor is not also engaged to audit the entity’s financial report, the auditor shall determine whether the audit of a single financial statement or of a specific element of those financial statements in accordance with Australian Auditing Standards is practicable.  (Ref: Para. A5–A6)

Acceptability of the Financial Reporting Framework

ASA 210 requires the auditor to determine the acceptability of the financial reporting framework applied in the preparation of the financial report.^[4]  In the case of an audit of a single financial statement or of a specific element of a financial statement, this shall include whether application of the financial reporting framework will result in a presentation that provides adequate disclosures to enable the intended users to understand the information conveyed in the financial statement or the element, and the effect of material transactions and events on the information conveyed in the financial statement or the element.  (Ref: Para. A7)

Form of Opinion

ASA 210 requires that the agreed terms of the audit engagement include the expected form of any reports to be issued by the auditor.^[5]  In the case of an audit of a single financial statement or of a specific element of a financial statement, the auditor shall consider whether the expected form of opinion is appropriate in the circumstances.  (Ref: Para. A8–A9)

ASA 200 states that Australian Auditing Standards are written in the context of an audit of a financial report; they are to be adapted as necessary in the circumstances when applied to audits of other historical financial information.^[6],^[7]  In planning and performing the audit of a single financial statement or of a specific element of a financial statement, the auditor shall adapt all Australian Auditing Standards relevant to the audit as necessary in the circumstances of the engagement.  (Ref: Para. A10–A14)

When forming an opinion and reporting on a single financial statement or on a specific element of a financial statement, the auditor shall apply the requirements in ASA 700,^[8] and, when applicable, ASA 800 adapted as necessary in the circumstances of the engagement.  (Ref: Para. A16–A22)

Reporting on the Entity’s Financial Report and on a Single Financial Statement or on a Specific Element of those Financial Statements

If the auditor undertakes an engagement to report on a single financial statement or on a specific element of a financial statement in conjunction with an engagement to audit the entity’s financial report, the auditor shall express a separate opinion for each engagement.

The audited single financial statement or the audited specific element of a financial statement may be published together with the entity’s audited financial report.  If the auditor concludes that the presentation of the single financial statement or of the specific element of a financial statement does not differentiate it sufficiently from the financial report, the auditor shall ask management to rectify the situation.  Subject to paragraphs 15 and 16, the auditor shall also differentiate the opinion on the single financial statement or on the specific element of a financial statement from the opinion on the financial report.  The auditor shall not issue the auditor’s report containing the opinion on the single financial statement or on the specific element of a financial statement until satisfied with the differentiation.

Considering the Implications of Certain Matters Included in the Auditor’s Report on the Entity’s Financial Report for the Audit of the Single Financial Statement or the Specific Element of a Financial Statement and for the Auditor’s Report Thereon

If the auditor’s report on an entity’s financial report includes:

1. A modified opinion in accordance with ASA 705;^[9]
2. An Emphasis of Matter paragraph or an Other Matter paragraph, in accordance with ASA 706,^[10]
3. A Material Uncertainty Related to Going Concern section in accordance with ASA 570;^[11]
4. Communication of key audit matters in accordance with ASA 701;^[12] or
5. A statement that describes an uncorrected material misstatement of the other information in accordance with ASA 720;^[13]

the auditor shall consider the implications, if any, that these matters have for the audit of the single financial statement or of the specific element of a financial statement and for the auditor’s report thereon. (Ref: Para. A23–A27)

Adverse Opinion or Disclaimer of Opinion in the Auditor’s Report on the Entity’s Financial report

If the auditor concludes that it is necessary to express an adverse opinion or disclaim an opinion on the entity’s financial report as a whole, ASA 705 does not permit the auditor to include in the same auditor’s report an unmodified opinion on a single financial statement that forms part of that financial report or on a specific element of that financial report.^[14]  This is because such an unmodified opinion would contradict the adverse opinion or disclaimer of opinion on the entity’s financial report as a whole.  (Ref: Para. A28)

If the auditor concludes that it is necessary to express an adverse opinion or disclaim an opinion on the entity’s financial report as a whole but, in the context of a separate audit of a specific element of those financial statements, the auditor nevertheless considers it appropriate to express an unmodified opinion on that element, the auditor shall only do so if:

1. The auditor is not prohibited by law or regulation from doing so;
2. That opinion is expressed in an auditor’s report that is not published together with the auditor’s report containing the adverse opinion or disclaimer of opinion; and
3. The element does not constitute a major portion of the entity’s financial report.

The auditor shall not express an unmodified opinion on a single financial statement of a financial report if the auditor has expressed an adverse opinion or disclaimed an opinion on the financial report as a whole.  This is the case even if the auditor’s report on the single financial statement is not published together with the auditor’s report containing the adverse opinion or disclaimer of opinion.  This is because a single financial statement is deemed to constitute a major portion of that financial report.

(Ref: Para. 1, 6(c))

ASA 200 defines the term “historical financial information” as information expressed in financial terms in relation to a particular entity, derived primarily from that entity’s accounting system, about economic events occurring in past time periods or about economic conditions or circumstances at points in time in the past.^[15]

ASA 200 defines the term “financial statements” as a structured representation of historical financial information, including disclosures, intended to communicate an entity’s economic resources or obligations at a point in time or the changes therein for a period of time in accordance with a financial reporting framework.  The term “financial statements” ordinarily refers to a complete set of financial statements as determined by the requirements of the applicable financial reporting framework, but can also refer to a single financial statement.  Disclosures comprise explanatory or descriptive information, set out as required, expressly permitted or otherwise allowed by the applicable financial reporting framework, on the face of a financial statement, or in the notes, or incorporated therein by cross‑reference.^[16]  As noted in paragraph 6(c), reference to a single financial statement or specific element of a financial statement includes the related disclosures.

Australian Auditing Standards are written in the context of an audit of a financial report;^[17] they are to be adapted as necessary in the circumstances when applied to an audit of other historical financial information, such as a single financial statement or a specific element of a financial statement.  This Auditing Standard assists in this regard.  (Appendix 1 lists examples of such other historical financial information.)

A reasonable assurance engagement other than an audit of historical financial information is performed in accordance with Australian Standard on Assurance Engagements (ASAE) 3000.^[18]

Application of Australian Auditing Standards (Ref: Para. 7)

[Deleted by the AUASB.  Refer Aus A5.1]

ASA 200 requires the auditor to comply with (a) relevant ethical requirements, including those pertaining to independence, relating to financial report audit engagements, and (b) all Australian Auditing Standards relevant to the audit.  It also requires the auditor to comply with each requirement of an Australian Auditing Standard unless, in the circumstances of the audit, the entire Auditing Standard is not relevant or the requirement is not relevant because it is conditional and the condition does not exist, or application of the requirement(s) would relate to classes of transactions, account balances or disclosures that the auditor has determined are immaterial.  In rare and exceptional circumstances, when there are factors outside the auditor’s control that prevent the auditor from complying with a requirement, the auditor, where possible, performs appropriate alternative audit procedures.^[19]

Compliance with the requirements of Australian Auditing Standards relevant to the audit of a single financial statement or of a specific element of a financial statement may not be practicable when the auditor is not also engaged to audit the entity’s financial report. In such cases, the auditor often does not have the same understanding of the entity and its environment, including its internal control, as an auditor who also audits the entity’s financial report. The auditor also does not have the audit evidence about the general quality of the accounting records or other accounting information that would be acquired in an audit of the entity’s financial report. Accordingly, the auditor may need further evidence to corroborate audit evidence acquired from the accounting records. In the case of an audit of a specific element of a financial statement, certain Australian Auditing Standards require audit work that may be disproportionate to the element being audited. For example, although the requirements of ASA 570 are likely to be relevant in the circumstances of an audit of a schedule of accounts receivable, complying with those requirements may not be practicable because of the audit effort required. If the auditor concludes that an audit of a single financial statement or of a specific element of a financial statement in accordance with Australian Auditing Standards may not be practicable, the auditor may discuss with management whether another type of engagement might be more practicable.

Acceptability of the Financial Reporting Framework (Ref: Para. 8)

A single financial statement or a specific element of a financial statement may be prepared in accordance with an applicable financial reporting framework that is based on a financial reporting framework established by an authorised or recognised standards setting organisation for the preparation of a complete set of financial statements (for example, Australian Accounting Standards).  If this is the case, determination of the acceptability of the applicable framework may involve considering whether that framework includes all the requirements of the framework on which it is based that are relevant to the presentation of a single financial statement or of a specific element of a financial statement that provides adequate disclosures. 

Form of Opinion (Ref: Para. 9)

The form of opinion to be expressed by the auditor depends on the applicable financial reporting framework and any applicable laws or regulations.^[20] In accordance with ASA 700:^[21]

1. When expressing an unmodified opinion on a financial report prepared in accordance with a fair presentation framework, the auditor’s opinion, unless otherwise required by law or regulation, uses one of the following phrases:
   1. the financial report presents fairly, in all material respects, in accordance with [the applicable financial reporting framework]; or
   2. the financial report gives a true and fair view in accordance with [the applicable financial reporting framework]; and
2. When expressing an unmodified opinion on a financial report prepared in accordance with a compliance framework, the auditor’s opinion states that the financial report is prepared, in all material respects, in accordance with [the applicable financial reporting framework].

In the case of a single financial statement or of a specific element of a financial statement, the applicable financial reporting framework may not explicitly address the presentation of the financial statement or of the specific element of the financial statement. This may be the case when the applicable financial reporting framework is based on a financial reporting framework established by an authorised or recognised standards setting organisation for the preparation of a complete set of financial statements (for example, Australian Accounting Standards). The auditor therefore considers whether the expected form of opinion is appropriate in the light of the applicable financial reporting framework. Factors that may affect the auditor’s consideration as to whether to use the phrases “presents fairly, in all material respects,” or “gives a true and fair view” in the auditor’s opinion include:

• Whether the applicable financial reporting framework is explicitly or implicitly restricted to the preparation of a financial report.
• Whether the single financial statement or the specific element of a financial statement will:
  • Comply fully with each of those requirements of the framework relevant to the particular financial statement or the particular element, and the presentation of the financial statement or the specific element of a financial statement include the related disclosures.
  • If necessary to achieve fair presentation, provide disclosures beyond those specifically required by the framework or, in exceptional circumstances, depart from a requirement of the framework.

The auditor’s decision as to the expected form of opinion is a matter of professional judgement. It may be affected by whether use of the phrases “presents fairly, in all material respects,” or “gives a true and fair view” in the auditor’s opinion on a single financial statement or on a specific element of a financial statement prepared in accordance with a fair presentation framework is generally accepted in the particular jurisdiction.

(Ref: Para. 10)

The relevance of each of the Australian Auditing Standards requires careful consideration.  Even when only a specific element of a financial statement is the subject of the audit, Australian Auditing Standards such as ASA 240,^[22] ASA 550^[23] and ASA 570 are, in principle, relevant.  This is because the element could be misstated as a result of fraud, the effect of related party transactions, or the incorrect application of the going concern basis of accounting under the applicable financial reporting framework.

ASA 260 requires the auditor to determine the appropriate person(s) within the entity’s governance structure with whom to communicate.^[24]  ASA 260 notes that, in some cases, all of those charged with governance are involved in managing the entity, and the application of communication requirements is modified to recognise this position.^[25]  When a financial report is also prepared by the entity, those person(s) responsible for the oversight of the preparation of the single financial statement or the element may not be the same as those charged with governance responsible for the oversight of the preparation of the financial report.

Furthermore, Australian Auditing Standards are written in the context of an audit of a financial report; they are to be adapted as necessary in the circumstances when applied to the audit of a single financial statement^[26] or of a specific element of a financial statement.  For example, written representations from management about the financial report would be replaced by written representations about the presentation of the financial statement or the element in accordance with the applicable financial reporting framework.

Matters included in the auditor’s report on the financial report may have implications for the audit of a single financial statement or of an element of a financial statement (see paragraph 14).  When planning and performing an audit of a single financial statement or a specific element of a financial statement in conjunction with the audit of the entity’s financial report, the auditor may be able to use audit evidence obtained as part of the audit of the financial report in the audit of the financial statement or the element.  Australian Auditing Standards, however, require the auditor to plan and perform the audit of the financial statement or element to obtain sufficient appropriate audit evidence on which to base the opinion on the financial statement or on the element.

The individual financial statements that comprise a financial report, and many of the specific elements of that financial report, including their related disclosures, are interrelated.  Accordingly, when auditing a single financial statement or a specific element of a financial statement, the auditor may not be able to consider the financial statement or the element in isolation.  Consequently, the auditor may need to perform procedures in relation to the interrelated items to meet the objective of the audit. 

Furthermore, the materiality determined for a single financial statement or for a specific element of a financial statement may be lower than the materiality determined for the entity’s financial report; this will affect the nature, timing and extent of the audit procedures and the evaluation of uncorrected misstatements.

(Ref: Para. 11)

ASA 700 requires the auditor, in forming an opinion, to evaluate whether the financial report provides adequate disclosures to enable the intended users to understand the effect of material transactions and events on the information conveyed in the financial report.^[27]  In the case of a single financial statement or of a specific element of a financial statement, it is important that the financial statement or the element, in view of the requirements of the applicable financial reporting framework, provides adequate disclosures to enable the intended users to understand the information conveyed in the financial statement or the element, and the effect of material transactions and events on the information conveyed in the financial statement or the element.

Appendix 2 contains illustrations of independent auditor’s reports on a single financial statement and on a specific element of a financial statement.  Other illustrations of auditor’s reports may be relevant to reporting on a single financial statement or on a specific element of a financial statement (see, for example, the Appendices to ASA 700, ASA 705, ASA 570, ASA 720, and ASA 706).

Application of ASA 700 When Reporting on a Single Financial Statement or on a Specific Element of a Financial Statement

Paragraph 11 of this Auditing Standard explains that the auditor is required to apply the requirements in ASA 700, adapted as necessary in the circumstances of the engagement, when forming an opinion and reporting on a single financial statement or on a specific element of a financial statement.  In doing so, the auditor is also required to apply the reporting requirements in other Australian Auditing Standards adapted as necessary in the circumstances of the engagement, and may find the considerations addressed in paragraphs A19–A21 below helpful.

Going Concern

Depending on the applicable financial reporting framework used in the preparation of the single financial statement or the specific element of a financial statement, the description in the auditor's report of management’s responsibilities^[28] relating to going concern may need to be adapted as necessary.  The description in the auditor’s report of the auditor’s responsibilities^[29] may also need to be adapted as necessary depending on how ASA 570 applies in the circumstances of the engagement.

Key Audit Matters

ASA 700 requires the auditor to communicate key audit matters in accordance with ASA 701 for audits of a general purpose financial report of listed entities.^[30] For audits of a single financial statement or a specific element of a financial statement, ASA 701 only applies when communication of key audit matters in the auditor’s report on such financial report or elements is required by law or regulation, or the auditor otherwise decides to communicate key audit matters.  When key audit matters are communicated in the auditor’s report on a single financial statement or a specific element of a financial statement, ASA 701 applies in its entirety.^[31]

Other Information

ASA 720 deals with the auditor’s responsibilities relating to other information.  In the context of this Auditing Standard, reports containing or accompanying the single financial statement or specific element of a financial statement—the purpose of which is to provide owners (or similar stakeholders) with information on matters presented in the single financial statement or the specific element of a financial statement—are considered to be annual reports for purposes of ASA 720.  When the auditor determines that the entity plans to issue such a report, the requirements in ASA 720 apply to the audit of the single financial statement or the element.

Name of the Engagement Partner

[Deleted by the AUASB.  Refer to Aus A22.1]

The requirement in ASA 700 for the name of the engagement partner to be included in the auditor’s report where required by law or regulation also applies to audits of single financial statements and specific elements, accounts or items of a financial statement.^[*]

Reporting on the Entity’s Financial report and on a Single Financial Statement or on a Specific Element of a Financial Statement (Ref: Para. 14)

Considering the Implications of Certain Matters Included in the Auditor’s Report on the Entity’s Financial Report for the Audit of the Single Financial Statement or the Specific Element of a Financial Statement and for the Auditor’s Report Thereon

Paragraph 14 requires the auditor to consider the implications, if any, of certain matters included in the auditor’s report on the financial report for the audit of the single financial statement or the specific element of a financial statement and for the auditor’s report thereon.  Considering whether a matter included in the auditor’s report on a financial report is relevant in the context of an engagement to report on a single financial statement or a specific element of a financial statement involves professional judgement.

Factors that may be relevant in considering those implications include:

• The nature of the matter(s) being described in the auditor’s report on the financial report and the extent to which it relates to what is included in the single financial statement or a specific element of a financial statement.
• The pervasiveness of the matter(s) described in the auditor’s report on the financial report.
• The nature and extent of the differences between the applicable financial reporting frameworks.
• The extent of the difference between the period(s) covered by the financial report compared to the period(s) or dates of the single financial statement or the element of a financial statement.
• The time elapsed since the date of the auditor’s report on the financial report.

For example, in the case when there is a qualification of the auditor’s opinion in relation to accounts receivable in the auditor’s report on the financial report, and the single financial statement includes accounts receivable, or the specific element of a financial statement relates to accounts receivable, it is likely that there would be implications for the audit.  On the other hand, if the qualification of the auditor’s opinion on the financial report relates to classification of long‑term debt, then it is less likely that there would be implications for an audit of the single financial statement that is the income statement, or if the specific element of the financial statement relates to accounts receivable.

Key audit matters that are communicated in the auditor’s report on the financial report may have implications for an audit of a single financial statement or the specific element of the financial statement.  The information included in the Key Audit Matters section about how the matter was addressed in the audit of the financial report may be useful to the auditor’s determination of how to address the matter when it is relevant to the audit of the single financial statement or the specific element of the financial statement.

Even when certain matters included in the auditor’s report on the financial report do not have implications for the audit of, or for the auditor’s report on, the single financial statement or the specific element of a financial statement, the auditor may deem it appropriate to refer to the matter(s) in an Other Matter paragraph in an auditor’s report on the single financial statement or on the specific element of a financial statement (see ASA 706).^[32]  For example, the auditor may consider it appropriate to refer in the auditor’s report on the single financial statement or a specific element of the financial statement to a Material Uncertainty Related to Going Concern section included in the auditor’s report on the financial report.

(Ref: Para. 15)

In the auditor’s report on an entity’s financial report, the expression of a disclaimer of opinion regarding the results of operations and cash flows, where relevant, and an unmodified opinion regarding the financial position is permitted since the disclaimer of opinion is being issued in respect of the results of operations and cash flows only and not in respect of the financial report as a whole.^[33]

(Ref: Para. A3)

• Accounts receivable, allowance for doubtful accounts receivable, inventory, the liability for accrued benefits of a private superannuation plan, the recorded value of identified intangible assets, or the liability for “incurred but not reported” claims in an insurance portfolio, including related notes.
• A schedule of externally managed assets and income of a private superannuation plan, including related notes.
• A schedule of net tangible assets, including related notes.
• A schedule of disbursements in relation to a lease property, including explanatory notes.
• A schedule of profit participation or employee bonuses, including explanatory notes.