ISA 800 Notes

ISAs – Summaries and Application Guide ISA 800
ISA 800
AUDITS OF F/S PREPARED ON
SPECIAL PURPOSE FRAMEWORKS
ISA Reference
LO # LEARNING OBJECTIVE
(ISA 800)
LO 1 WHAT IS MEANT BY SPECIAL AUDITS 9, A1 – A4
LO 2 ACCEPTANCE OF ENGAGEMENT 8, A5–A8
LO 3 PLANNING AND PERFORMANCE OF THE ENGAGEMENT 9–10, A9–A12
11–14, A13–
LO 4 CONTENTS OF AN AUDIT REPORT UNDER ISA 800
A21
ILLUSTRATIONS OF INDEPENDENT AUDITOR’S REPORTS ON
APX Appendix
SPECIAL PURPOSE FINANCIAL STATEMENTS
1
ISA 800:
 deals with audit of Complete set of Special Purpose Financial Statements.
 is classified into three categories i.e. ①Acceptance, ②Planning & Performing and ③Opinion
and Reporting.
LO 1: WHAT IS MEANT BY SPECIAL AUDITS:
Difference between General Audits and Special Audits:
General Audits Special Audits

(ISA 200 – 700 Series) (ISA 800 Series)
– General Purpose Framework Special Purpose Framework (ISA 800)
(e.g. IFRS, GAAP) (e.g. Cash, Tax, Contractual, Regulatory)
– Complete Set Single (ISA 805)
– Comprehensive Summary (ISA 810)
– Historic Prospective (ISAE 3400)
Criteria Established by Authorities, or
Criteria Established by Authorities
Developed by Management
Normally, Additional because of Special
Normally, required by law
Situations
Special purpose framework:

Special Purpose Frameworks are designed to meet information needs of specific users.
Examples of Special Purpose Frameworks:
1. Regulatory Basis:
Such a framework may be established by a regulator, and may be used to prepare financial
statements for regulator.
2. Tax Basis:
Such a framework may be used to prepare financial statements to accompany an entity’s tax
return.
3. Cash Basis:
Such framework may be used to prepare financial statements for creditors.
4. Contractual Basis:
Such a framework may be established in the terms of a contract by individual parties e.g. in
a loan-agreement, or project-grant.
Partial Compliance with IFRS:

If a specific user requires F/S to be prepared in accordance with most (but not all) of IFRS, it will be
considered a contractual framework, and not IFRS (full or partial compliance with IFRS will not be
stated).
2
LO 2: ACCEPTANCE OF THE ENGAGEMENT:

Before accepting audit engagement, auditor shall determine whether Preconditions are present. As
F/S are prepared on Special Purpose Framework, therefore, we will particularly discuss
Acceptability of Framework.
Acceptability of Framework:
Auditor shall review steps taken by management to select AFRF (particularly when there are many
choices). AFRF should be selected considering nature of entity, purpose of financial statements,
users of financial statements and legal requirements.
If Framework is established by Law/regulations:

It is generally presumed to be acceptable.
If Framework is not prescribed by Law/regulations: (e.g. financial reporting provisions of a contract)

AFRF should show certain characteristics (as discussed in ISA 210)
If Financial Reporting Framework is supplemented by Laws and Regulatory Requirements:

Auditor shall determine whether there are additional requirements or conflicts, and shall act in
accordance with ISA 210.
LO 3: PLANNING AND PERFORMANCE OF THE ENGAGEMENT:

An auditor conducting audit of Special Purpose F/S is required to:
 Comply with all ISAs relevant to audit (from ISA 200 to 720).
 Comply with Ethical requirements.
 Make special consideration considering nature of engagement.
ISA 800 requires auditor to make following special considerations:

 As per ISA 315, auditor shall obtain understanding of special purpose framework (e.g.
provisions of a contact made by management).
 As per ISA 320:
o Auditor shall determine materiality but considering needs of specific users.
o Auditor is required to calculate materiality on his own, even if management has
agreed with intended users not to correct misstatements below a certain threshold.
 As per ISA 260/265, Some or all of TCWG may not be responsible for preparation of special
purpose financial statements.
3
LO 4: CONTENTS OF AN AUDIT REPORT UNDER ISA 800:

While preparing audit report, auditor shall apply requirements of ISAs as following:
 ISA 700 (i.e. Contents of audit report under shall be same as per ISA 700)
 ISA 570 (i.e. Description of management’s responsibilities and auditor’s responsibilities
may be modified if Going Concern Basis is NOT relevant e.g. in Tax Basis Framework).
 ISA 701 (i.e. KAM is NOT included in Special Purpose F/S unless required by law or deemed
necessary by auditor).
 ISA 720 (i.e. Other Information paragraph will be included only if other information is
issued alongwith Auditor’s Report.)
Modified Opinion:
ISA 800 does not give examples of modified opinions. However, if auditor expresses modified
opinion, drafting of modification will be same as in ISA 705.
Emphasis of Matter paragraph:

Auditor’s report under special purpose framework shall always include Emphasis of Matter
Paragraph to emphasis Basis of Accounting, including statement that financial statements may not
be suitable for other purposes.
Other Matter Paragraph:

Report on special purpose financial statements may include Other Matter paragraph to refer to:
 Other set of financial statements (i.e. general purpose) if audited by same auditor.
 To restrict distribution of report (e.g. when F/S are prepared on regulatory or contractual
basis framework)
Name of Engagement Partner:

 Requirement is same as in ISA 700 i.e. required only for listed companies.
 NOT included in other entities unless required by law or deemed necessary by auditor.
Exam Tip – Modification in Auditor’s Report on General Purpose F/S

If auditor’s report on general purpose F/S is modified (e.g. modified opinion, EOM/OM, GCU, Other
Information), then auditor’s report on Special/Additional Audit (i.e. ISA 800 series) will also
communicate these modifications to users. This may be done:
 by adding Other Matter Paragraph (ISA 800/805), or
 in section “Audited F/S and our Report thereon” (ISA 810).
4
APX: ILLUSTRATIONS OF AUDIT REPORTS ON FINANCIAL STATEMENTS USING

SPECIAL PURPOSE FRAMEWORKS:
Prepared under (i.e.
ISA Reference Prepared for (i.e. Users) Further Facts
Framework)
ISA 800 Financial reporting provisions of
 Contractual Companies  Distribution of report restricted.
(Illustration 1) a contract.
ISA 800  Partnership (and its
Tax basis of accounting  Distribution of report restricted.
(Illustration 2) Partners)
 Company also prepared financial
ISA 800 Financial reporting provisions statements on the basis of IFRS.
 Regulator.
(Illustration 3) established by a regulator.  Going Concern Uncertainty and
KAM paragraphs included.
Example of Elements of an Audit Report under Special Purpose Framework

Opinion
We have audited …..
In our opinion, the accompanying financial statements of the Company for the year ended December 31, 20X1
are prepared in all material respects, in accordance with the financial reporting provisions of Section Z of the
contract dated January 1, 20X1 between the Company and DEF Company (“the contract”).
Emphasis of Matter – Basis of Accounting and Restriction on Distribution and Use

We draw attention to Note X to the financial statements, which describes the basis of accounting. The
financial statements are prepared to assist the Company in complying with the financial reporting provisions
of the contract referred to above. As a result, the financial statements may not be suitable for another
purpose. Our report is intended solely for the Company and DEF Company and should not be distributed to or
used by parties other than the Company or DEF Company. Our opinion is not modified in respect of this matter.
Material Uncertainty Related to Going Concern

We draw attention to Note 6 in the financial statements, which indicates that the Company incurred a net loss
of ZZZ during the year ended December 31, 20X1 and, as of that date, the Company’s current liabilities
exceeded its total assets by YYY. As stated in Note 6, these events or conditions, along with other matters as
set forth in Note 6, indicate that a material uncertainty exists that may cast significant doubt on the
Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
Other Matter
The Company has prepared a separate set of financial statements for the year ended December 31, 20X1 in
accordance with International Financial Reporting Standards on which we issued a separate auditor’s report
to the shareholders of the Company dated March 31, 20X2.

ISA 800 Notes

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ISAs – Summaries and Application Guide ISA 800

LO 1 WHAT IS MEANT BY SPECIAL AUDITS 9, A1 – A4

LO 2 ACCEPTANCE OF ENGAGEMENT 8, A5–A8

LO 3 PLANNING AND PERFORMANCE OF THE ENGAGEMENT 9–10, A9–A12

LO 1: WHAT IS MEANT BY SPECIAL AUDITS:

Difference between General Audits and Special Audits:

General Audits Special Audits

Special purpose framework:

Examples of Special Purpose Frameworks:

Partial Compliance with IFRS:

LO 2: ACCEPTANCE OF THE ENGAGEMENT:

If Framework is established by Law/regulations:

If Framework is not prescribed by Law/regulations: (e.g. financial reporting provisions of a contract)

If Financial Reporting Framework is supplemented by Laws and Regulatory Requirements:

LO 3: PLANNING AND PERFORMANCE OF THE ENGAGEMENT:

ISA 800 requires auditor to make following special considerations:

LO 4: CONTENTS OF AN AUDIT REPORT UNDER ISA 800:

Emphasis of Matter paragraph:

Other Matter Paragraph:

Name of Engagement Partner:

Exam Tip – Modification in Auditor’s Report on General Purpose F/S

APX: ILLUSTRATIONS OF AUDIT REPORTS ON FINANCIAL STATEMENTS USING

Example of Elements of an Audit Report under Special Purpose Framework

Emphasis of Matter – Basis of Accounting and Restriction on Distribution and Use

Material Uncertainty Related to Going Concern

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