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• identify the different types of auditor’s reports that can be issued…

- - - - asked to express an opinion on a single financial statement such as a balance sheet, an income statement or a cash flow statement.
        
        . It is also possible to express an opinion on components of a financial statement (the most commonly specified accounts for which assurance is requested are accounts receivable, investments, inventory and accounts payable).
        
        . It is often appropriate for engagements of this type to be performed on the basis
        of agreed-upon procedures (discussed later in this module) rather than as an audit, due to scope restrictions.
        
        accepting engagement considerations
        
        an important consideration is whether the auditor is also engaged to audit the entity’s complete set of financial statements.
        
        Not
        
        need to determine whether it is practicable to undertake an audit of a single financial statement or a specific element.
        
        The auditor will also need to consider whether the expected presentation of the financial statement or element will provide adequate disclosure to allow the intended users to appropriately understand the information conveyed.
        
        The auditor should also consider whether the expected form of audit opinion is appropriate in the circumstances (ISA 805, paras 7–9).
        
        materiality
        
        consider the concept of materiality in relation to ‘other’ financial information. This is especially the case when auditing components of a financial statement, such as a particular account balance, as components provide a smaller base against which to measure materiality compared to the financial statements taken as a whole.
    - - An entity may sometimes prepare a summary from audited financial statements to inform users of the highlights of the entity’s performance and financial position, or provide them with financial information that is believed to be more beneficial for their needs.
      - acceptance
        
        The auditor should not accept such an engagement unless they also have audited or will audit the financial statements from which the summary was derived (ISA 810, para. 5).
        
        Before accepting such an engagement, the auditor is required to:
        (a) determine whether the applied criteria are acceptable;
        (b) obtain the agreement from management that it acknowledges and understands its responsibility:
        (i) for the preparation of the summary financial statements in accordance with the applied criteria;
        (ii) to make the audited financial statements available to the intended users of the summary financial statements without undue difficulty …; and
        (iii) to include the auditor’s report on the summary financial statements in any document that contains the summary financial statements and that indicates that the auditor has reported on them.
        (c) agree with management the form of opinion to be expressed on the summary financial statements (ISA 810, para. 6).
      - Opinion
        
        The auditor’s report on summary financial statements gives an opinion as to whether the information in the summary is consistent with the full financial statements.
        
        The auditor should ensure that the summary financial statement is clearly described as such to prevent this report being mistaken as the auditor’s report on the full financial statements
- - - - The ISA 800 series of auditing standards provide standards and guidance to auditors on the audits of specialised areas, being audits of historical financial information other than general purpose financial statements.
      - PASSCARD EXAMPLES
      - What do the auditors need to determine when accepting an engagement for an audit of specialised area?
        
        TABLE!!!!
      - prepared to meet the financial needs of specific users.
      - While accounts prepared in accordance with International Financial Reporting Standards or national accounting standards such as the Australian Accounting Standards are designed to meet the common information needs of many users, examples of special purpose frameworks include:
        
        • a tax basis of accounting for a set of financial statements that accompany an entity’s tax return;
        • the cash receipts and disbursements basis of accounting for cash flow information …;
        • 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 those established under a loan agreement or a project grant’ (ISA 800, para. A1).
        
        Despite this potentially broad distribution, such financial statements are regarded as special purpose as they are designed to meet the needs of specific users (ISA 800, para. A4).
      - In determining whether to accept an engagement involving an audit of special purpose financial statements, the auditor is required to obtain an understanding of:SUP
        (a) the purpose for which the financial statements are prepared;
        (b) the intended users; and
        (c) the steps taken by management to determine that the applicable financial reporting framework is acceptable in the circumstances (ISA 800, para. 8).
        
        A key factor in this determination is the financial information needs of the intended users (ISA 800, para. A5).
        In planning and performing a special purpose audit, the auditor is required to comply with:
        (a) relevant ethical requirements, including those pertaining to independence …; and
        (b) all ISAs relevant to the audit (ISA 800, para. A9).
      - The ‘application of some of the requirements of the ISAs in an audit of special purpose financial statements may require special consideration by the auditor.
        
        For example, in ISA 320, judgments about matters that are material to users of the financial statements are based on a consideration of the common financial information needs of users as a group’, while these ‘judgments are based on a consideration of the financial information needs of the intended users’ for an audit of special purpose financial statements (ISA 800, para. A10).
      - auditor's report
        
        When forming an opinion and reporting on special purpose financial statements, the auditor applies the requirements of ISA 700 (ISA 800, para. 11).
        
        The auditor’s report also describes either the purpose for which the financial statements are prepared and identifies the intended users, or refers to a note in the special purpose financial statements that describes these circumstances (ISA 800, para. 13).
        
        Emphasis of Matter paragraph
        
        It also includes ‘an Emphasis of Matter paragraph alerting users … that the financial statements are prepared in accordance with a special purpose framework and may not be suitable for another purpose’ (ISA 800, para. 14).
    - - An Australian perspective
        
        Listed entities in Australia can elect to prepare a concise financial report to send to their shareholders instead of the full annual report that includes the financial statements for the year.
        
        A concise financial report prepared under the Corporations Act in Australia is an example of summary financial statements.
        
        legislation
        
        Concise financial reports are prepared in accordance with Australian Accounting Standard AASB 1039 Concise Financial Reports as required by the Corporations Act.
        
        Guidance for auditors reporting on a concise financial report is contained in Guidance Statement GS 001 Concise Financial Reports under the Corporations Act issued by the Auditing and Assurance Standards Board (AUASB).
      - VS Audit of GPFR
        
        The audit of concise financial reports should be treated as a separate engagement from the audit of the annual GPFRs.
        
        Additional audit procedures will be required when undertaking the audit of the concise financial report
        
        AASB 1039 requires the inclusion of a discussion and analysis of the principal factors that affect the financial performance, financial position and financing and investment activities of an entity.
        
        Although AASB 1039 does not mandate specific discussion and analysis disclosures, it does illustrate the types of disclosures that may be made in the concise report.
        
        Opinion
        
        The additional audit procedures required when conducting the audit of a concise financial report will enable the auditor to reach a conclusion on the discussion and analysis when forming an opinion whether, in all material respects, the concise financial report complies with the requirements of AASB 1039.
        
        qualified opinion
        
        If the auditor considers that the discussion and analysis is overly subjective and/or prospective and that it cannot be quantified or verified, then the auditor will issue a modified auditor’s report in accordance with ASA 705, qualifying the auditor’s opinion as a result of a disagreement with management over the adequacy or appropriateness of disclosures in the concise financial report.