Special Considerations—Audits of FinanciSpecial Considerations—Audits of Financial Reports Prepared in Accordance with Special Purpose Frameworks

Auditing Standard ASA 800

The Auditing and Assurance Standards Board (AUASB) made Auditing Standard ASA 800 Special Considerations – Audits of Financial Reports Prepared in Accordance with Special Purpose Frameworks pursuant to section 227B of the Australian Securities and Investments Commission Act 2001 and section 336 of the Corporations Act 2001, on 26 July 2016.

This compiled version of ASA 800 incorporates subsequent amendments contained in other Auditing Standards made by the AUASB up to and including 7 September 2021 (see Compilation Details).

Auditing Standard ASA 800

Special Considerations—Audits of Financial Reports Prepared in Accordance with Special Purpose Frameworks

Application

Aus 0.1 This Auditing Standard applies to:

(a) an audit of a financial report for a financial year, or an audit of a financial report for a half‑year, in accordance with the Corporations Act 2001; and

(b) an audit of a financial report, or a complete set of financial statements, for any other purpose.

Aus 0.2 This Auditing Standard also applies, as appropriate, to an audit of other historical financial information.

Operative Date

Aus 0.3 This Auditing Standard is operative for financial reporting periods ending on or after 15 December 2016. [Note: For operative dates of paragraphs changed or added by an Amending Standard, see Compilation Details.]

Introduction

Scope of this Auditing Standard

1. The Australian Standards on Auditing in the 100–700 series apply to an audit of a financial report. This Auditing Standard deals with special considerations in the application of those Australian Auditing Standards to an audit of a financial report prepared in accordance with a special purpose framework.
2. This Auditing Standard is written in the context of a financial report prepared in accordance with a special purpose framework. ASA 805[1] deals with special considerations relevant to an audit of a single financial statement or of a specific element, account or item of a financial statement.
3. This Auditing Standard does not override the requirements of the other Auditing Standards; nor does it purport to deal with all special considerations that may be relevant in the circumstances of the engagement.

Effective Date

1. [Deleted by the AUASB. Refer Aus 0.3]

Objective

1. The objective of the auditor, when applying Australian Auditing Standards in an audit of a financial report prepared in accordance with a special purpose framework, is to address appropriately the special considerations that are relevant to:
   1. The acceptance of the engagement;
   2. The planning and performance of that engagement; and
   3. Forming an opinion and reporting on the financial report.

Definitions

1. For the purposes of this Auditing Standard, the following terms have the meanings attributed below:
   1. Special purpose financial statements – Financial statements prepared in accordance with a special purpose framework. (Ref: Para.A4)
   2. Special purpose framework – A financial reporting framework designed to meet the financial information needs of specific users. The financial reporting framework may be a fair presentation framework or a compliance framework.[2] (Ref: Para. A1–A4)

Aus 6.1 Special purpose financial report means a complete set of financial statements[*], including an assertion statement[#] by those responsible for the financial report, prepared in accordance with a special purpose framework. (Ref: Para. A1-A4)

1. Reference to “financial statements” in this Auditing Standard means “a complete set of special purpose financial statements”. The requirements of the applicable financial reporting framework determine the presentation, structure, and content of the financial statements, and what constitutes a complete set of financial statements. Reference to “special purpose financial statements” includes the related disclosures.

Requirements

Considerations When Accepting the Engagement

Acceptability of the Financial Reporting Framework

1. 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.

Considerations When Planning and Performing the Audit

1. 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)
2. 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.

Forming an Opinion and Reporting Considerations

1. 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

1. 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.
2. 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

1. 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)

* * *

Application and Other Explanatory Material

Definition of Special Purpose Framework (Ref: Para 6)

1. Examples of special purpose frameworks are:

• A 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 an entity may be requested to prepare for creditors;
• The financial reporting provisions established by a regulator to meet the requirements of that regulator; or
• The financial reporting provisions of a contract, such as a bond indenture, a loan agreement, or a project grant.

Aus A1.1 The Corporations Act 2001,[*] other applicable law or regulation, or certain parties, may determine whether a financial report is required to be prepared and whether compliance with Australian Accounting Standards is required. Australian Accounting Standards set out requirements for General Purpose Financial Statements. In some circumstances, entities are permitted to prepare Special Purpose Financial Statements as defined in AASB 1054 Australian Additional Disclosures. Such circumstances include for-profit private sector entities required only by their constituting document or another document (e.g., a loan agreement) to prepare financial statements that comply with Australian Accounting Standards, provided that the relevant document was created or last amended before 1 July 2021, as well as not-for-profit entities that assess themselves to be non-reporting entities.

1. There may be circumstances where a special purpose framework is based on a financial reporting framework established by an authorised or recognised standards setting organisation or by law or regulation, but does not comply with all the requirements of that framework. An example is a contract that requires a financial report to be prepared in accordance with most, but not all, of the Financial Reporting Standards of Jurisdiction X. When this is acceptable in the circumstances of the engagement, it is inappropriate for the description of the applicable financial reporting framework in the special purpose financial report to imply full compliance with the financial reporting framework established by the authorised or recognised standards setting organisation or by law or regulation. In the above example of the contract, the description of the applicable financial reporting framework may refer to the financial reporting provisions of the contract, rather than make any reference to the Financial Reporting Standards of Jurisdiction X.
2. In the circumstances described in paragraph A2, the special purpose framework may not be a fair presentation framework even if the financial reporting framework on which it is based is a fair presentation framework. This is because the special purpose framework may not comply with all the requirements of the financial reporting framework established by the authorised or recognised standards setting organisation or by law or regulation that are necessary to achieve fair presentation of the financial report.
3. A financial report prepared in accordance with a special purpose framework may be the only financial report an entity prepares. In such circumstances, that financial report may be used by users other than 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 a special purpose financial report for purposes of the Australian Auditing Standards. The requirements in paragraphs 13–14 are designed to avoid misunderstandings about the purpose for which the financial report is prepared. 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 report, or in the notes, or incorporated therein by cross‑reference.[9]

Considerations When Accepting the Engagement

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

1. In the case of a special purpose financial report, the financial information needs of the intended users are a key factor in determining the acceptability of the financial reporting framework applied in the preparation of the financial report.
2. The applicable financial reporting framework may encompass the financial reporting standards established by an organisation that is authorised or recognised to promulgate standards for a special purpose financial report. In that case, those standards will be presumed acceptable for that purpose if the organisation follows an established and transparent process involving deliberation and consideration of the views of relevant stakeholders. In some jurisdictions, law or regulation may prescribe the financial reporting framework to be used by management in the preparation of a special purpose financial report for a certain type of entity. For example, a regulator may establish financial reporting provisions to meet the requirements of that regulator. In the absence of indications to the contrary, such a financial reporting framework is presumed acceptable for a special purpose financial report prepared by such entity.
3. Where the financial reporting standards referred to in paragraph A6 are supplemented by legislative or regulatory requirements, ASA 210 requires the auditor to determine whether any conflicts between the financial reporting standards and the additional requirements exist, and prescribes actions to be taken by the auditor if such conflicts exist.[10]
4. The applicable financial reporting framework may encompass the financial reporting provisions of a contract, or sources other than those described in paragraphs A6 and A7. In that case, the acceptability of the financial reporting framework in the circumstances of the engagement is determined by considering whether the framework exhibits attributes normally exhibited by acceptable financial reporting frameworks as described in Appendix 2 of ASA 210. In the case of a special purpose framework, the relative importance to a particular engagement of each of the attributes normally exhibited by acceptable financial reporting frameworks is a matter of professional judgement. For example, for purposes of establishing the value of net assets of an entity at the date of its sale, the vendor and the purchaser may have agreed that very prudent estimates of allowances for uncollectible accounts receivable are appropriate for their needs, even though such financial information is not neutral when compared with financial information prepared in accordance with a general purpose framework.

Considerations When Planning and Performing the Audit (Ref: Para. 9)

1. [Deleted by the AUASB. Refer Aus A9.1]

Aus A9.1 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.[11]

1. Application of some of the requirements of the Auditing Standards in an audit of a special purpose financial report may require special consideration by the auditor. For example, in ASA 320, judgements about matters that are material to users of the financial report are based on a consideration of the common financial information needs of users as a group.[12] In the case of an audit of a special purpose financial report, however, those judgements are based on a consideration of the financial information needs of the intended users.
2. In the case of a special purpose financial report, such as those prepared in accordance with the requirements of a contract, management may agree with the intended users on a threshold below which misstatements identified during the audit will not be corrected or otherwise adjusted. The existence of such a threshold does not relieve the auditor from the requirement to determine materiality in accordance with ASA 320 for purposes of planning and performing the audit of the special purpose financial report.
3. ASA 260 requires the auditor to determine the appropriate person(s) within the entity’s governance structure with whom to communicate.[13] ASA 260 notes that, in some cases, all of those charged governance are involved in managing the entity, and the application of the communication requirements is modified to recognise this position.[14] When a general purpose financial report is also prepared by the entity, those person(s) responsible for the oversight of the preparation of the special purpose financial report may not be the same as those charged with governance responsible for the oversight of the preparation of that general purpose financial report.

Forming an Opinion and Reporting Considerations (Ref: Para. 11)

1. The Appendix to this Auditing Standard contains illustrations of independent auditors’ reports on a special purpose financial report. Other illustrations of auditor’s reports may be relevant to reporting on a special purpose financial report (see for example, the Appendices to ASA 700, ASA 705,[15] ASA 570,[16] ASA 720, and ASA 706[17]).

Application of ASA 700 When Reporting on a Special Purpose Financial Report

1. Paragraph 11 of this Auditing Standard explains that the auditor is required to apply ASA 700 when forming an opinion and reporting on a special purpose financial report. In doing so, the auditor is also required to apply the reporting requirements in other Auditing Standards and may find the special considerations addressed in paragraphs A15–A19 below helpful.

Going Concern

1. A special purpose financial report may or may not be prepared in accordance with a financial reporting framework for which the going concern basis of accounting is relevant (e.g., the going concern basis of accounting is not relevant for some financial report prepared on a tax basis in particular jurisdictions).[18] Depending on the applicable financial reporting framework used in the preparation of the special purpose financial report, the description in the auditor’s report of management’s responsibilities[19] relating to going concern may need to be adapted as necessary. The description in the auditor’s report of the auditor’s responsibilities[20] may also need to be adapted as necessary depending on how ASA 570 applies in the circumstances of the engagement.

Key Audit Matters

1. ASA 700 requires the auditor to communicate key audit matters in accordance with ASA 701[21] for audits of a general purpose financial report of listed entities. For audits of a special purpose financial report, ASA 701 only applies when communication of key audit matters in the auditor’s report on the special purpose financial report 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 special purpose financial report, ASA 701 applies in its entirety.[22]

Other Information

1. ASA 720[23] deals with the auditor’s responsibilities relating to other information. In the context of this Auditing Standard, reports containing or accompanying the special purpose financial report—the purpose of which is to provide owners (or similar stakeholders) with information on matters presented in the special purpose financial report—are considered to be annual reports for the purpose of ASA 720. In the case of a financial report prepared using a special purpose framework, the term “similar stakeholders” includes the specific users whose financial information needs are met by the design of the special purpose framework used to prepare the special purpose financial report. When the auditor determines that the entity plans to issue such a report, the requirements in ASA 720 apply to the audit of the special purpose financial report.

Name of the Engagement Partner

1. [Deleted by the AUASB. Refer Aus A18.1]

Aus 18.1 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 special purpose financial reports.[*]

Inclusion of a Reference to the Auditor’s Report on the General Purpose Financial Report

1. The auditor may deem it appropriate to refer, in an Other Matter paragraph in the auditor’s report on the special purpose financial report, to the auditor’s report on the general purpose financial report or to matter(s) reported therein (see ASA 706).[24] For example, the auditor may consider it appropriate to refer in the auditor’s report on the special purpose financial report to a Material Uncertainty Related to Going Concern section included in the auditor’s report on the general purpose financial report.

Alerting Readers that the Financial report is Prepared in Accordance with a Special Purpose Framework (Ref: Para. 14)

1. The special purpose financial report may be used for purposes other than those for which they were intended. For example, a regulator may require certain entities to place the special purpose financial report on public record. To avoid misunderstandings, the auditor alerts users of the auditor’s report by including an Emphasis of Matter paragraph explaining that the financial report is prepared in accordance with a special purpose framework and, therefore, may not be suitable for another purpose. ASA 706 requires this paragraph to be included within a separate section of the auditor’s report with an appropriate heading that includes the term “Emphasis of Matter”.[25]

Restriction on Distribution or Use (Ref: Para. 14)

1. In addition to the alert required by paragraph 14, the auditor may consider it appropriate to indicate that the auditor’s report is intended solely for the specific users. Depending on the law or regulation of the particular jurisdiction, this may be achieved by restricting the distribution or use of the auditor’s report. In these circumstances, the paragraph referred to in paragraph 14 may be expanded to include these other matters, and the heading modified accordingly (see illustrations in the Appendix to this Auditing Standard).