Reports on Financial Reports Prepared inReports on Financial Reports Prepared in Accordance With an Alternative Comprehensive Basis of Accounting

Reports on Financial Reports Prepared in Accordance With an Alternative Comprehensive Basis of Accounting

18 A comprehensive basis of accounting comprises a set of criteria used in preparing a financial report which applies to all material items and which has substantial support. A financial report that is not prepared to meet the common information needs of a wide range of users may be prepared to meet the financial needs of specific users. The information needs of such users will determine the applicable financial reporting framework in such circumstances (which is referred to in this Auditing Standard as “an alternative comprehensive basis of accounting”). A financial report prepared in accordance with such financial reporting frameworks may be the only financial report prepared by an entity and, in such circumstances, is often used by other users in addition to those for whom the financial reporting framework is designed. Despite the broad distribution of the financial report in those circumstances, the financial report is still considered to be designed to meet the financial information needs of specific users for purposes of the Auditing Standard. In addition, although specific users may not be identified, a financial report that is prepared in accordance with a framework that is not designed to achieve fair presentation is also considered to be prepared in accordance with an alternative comprehensive basis of accounting. Examples of financial reporting frameworks that are designed to address the needs of specific users include the following:

• the tax basis of accounting for a financial report that accompanies an entity’s tax return;
• the cash receipts and disbursements basis of accounting for cash flow information that a business enterprise may be requested to prepare by creditors; and
• the financial reporting provisions of a government regulatory agency for a financial report prepared for regulatory purposes.

19 In Australia, “non-reporting entities” have the option to prepare a special purpose financial report in compliance with those Australian Accounting Standards necessary to enable the financial report to meet the special purpose needs of users. Appendix 2 contains a summary of the audit reporting requirements under the Corporations Act 2001.

20 The auditor shall consider whether the financial report is intended, or purports, to meet the information needs common to users who are unable to command the preparation of reports tailored so as to satisfy, specifically, all of their information needs.

21 Under paragraph 7 of this Auditing Standard, the auditor needs to understand the exact nature of the engagement and the purpose for which the financial report is prepared. This Auditing Standard is not applicable when the financial information upon which the auditor is to report is intended, or purports, to be a general purpose financial report. When, in the auditor’s opinion, the financial report is, or purports, to be a general purpose financial report, ASA 700 is applicable. Furthermore, ASA 210 Terms of Audit Engagements deals with circumstances where there has been a change in the terms of the engagement.