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.^[3]  In an audit of a special purpose financial report, the auditor shall obtain an understanding of: (Ref: Para. A5–A8)

1. The purpose for which the financial report is prepared;
2. The intended users; and
3. The steps taken by management to determine that the applicable financial reporting framework is acceptable in the circumstances. 

ASA 200 requires the auditor to comply with all Australian Auditing Standards relevant to the audit.^[4]  In planning and performing an audit of a special purpose financial report, the auditor shall determine whether application of the Australian Auditing Standards requires special consideration in the circumstances of the engagement. (Ref: Para. A9–A12)

ASA 315 requires the auditor to obtain an understanding of the entity’s selection and application of accounting policies.^[5] In the case of a financial report prepared in accordance with the provisions of a contract, the auditor shall obtain an understanding of any significant interpretations of the contract that management made in the preparation of that financial report. An interpretation is significant when adoption of another reasonable interpretation would have produced a material difference in the information presented in the financial report.

When forming an opinion and reporting on a special purpose financial report, the auditor shall apply the requirements in ASA 700.^[6]  (Ref: Para. A13–A19)

Description of the Applicable Financial Reporting Framework

ASA 700 requires the auditor to evaluate whether the financial report adequately refers to or describes the applicable financial reporting framework.^[7] In the case of a financial report prepared in accordance with the provisions of a contract, the auditor shall evaluate whether the financial report adequately describes any significant interpretations of the contract on which the financial report is based.

ASA 700 deals with the form and content of the auditor’s report, including the specific ordering for certain elements.  In the case of an auditor’s report on a special purpose financial report:

1. The auditor’s report shall also describe the purpose for which the financial report is prepared and, if necessary, the intended users, or refer to a note in the special purpose financial report that contains that information; and
2. If management has a choice of financial reporting frameworks in the preparation of such a financial report, the explanation of management’s^[8] responsibility for the financial report shall also make reference to its responsibility for determining that the applicable financial reporting framework is acceptable in the circumstances.

Alerting Readers that the Financial Report is Prepared in Accordance with a Special Purpose Framework

The auditor’s report on a special purpose financial report shall include an Emphasis of Matter paragraph alerting users of the auditor’s report that the financial report is prepared in accordance with a special purpose framework and that, as a result, the financial report may not be suitable for another purpose.  (Ref: Para. A20–A21)