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Auditing and Assurance Principles

CHAPTER FOURTEEN
SPECIAL CONSIDERATIONS AND AUDITS OF
SUMMARY FINANCIAL STATEMENTS

Learning Objectives

After studying this chapter, you should be able to:

 Identify the different engagements where auditors issue reports on special
considerations and summary financial statements.
 Determine the requirements of PSAs in issuing reports for special purpose.
 Describe the contents of special purpose audit reports.

Introduction

Special considerations include the following:

1. Audits of financial statements prepared in accordance with special purpose frameworks
2. Audits of single financial statements and specific elements, accounts or items of a
financial statement.

In addition to these engagements, this Chapter also discusses reporting on summary
financial statements.

Overall considerations

The auditor should review and assess the conclusions drawn from the audit evidence
obtained during the special-purpose audit engagement as the basis for an expression of
opinion. The report should contain clear written expression of opinion.

Before undertaking a special purpose audit engagement, the auditor should ensure there
is agreement with client as to the exact nature of the engagement and the form and content of
the report to be issued.

Before undertaking a special purpose audit engagement, the auditor should ensure there is
agreement with client as to

1. The exact nature of the engagement and
2. The form and content of the report to be issued
3.

Audits of Financial Statements Prepared
In Accordance with Special Purpose Framework

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Chapter Fourteen – Special Considerations and
Audits of Summary Financial Statements

The objective of the auditor, when applying PSAs in an audit of financial statements
prepared in accordance with special purpose framework, is to address appropriately the special
considerations that are relevant to:

a. The acceptance of the engagement;
b. The planning and performance of that engagement and
c. Forming an opinion and reporting on the financial statements.

Special purpose financial statements are financial statements prepared in accordance
with a special purpose framework. A special purpose framework is 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.

Examples of social purpose frameworks are:

 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 that
an entity's may be request 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.

Acceptance of the Engagement

PSA 210 (redrafted) requires the auditor to determine the acceptability of the financial reporting
framework applied in the preparation of the financial statement. In an audit of special purpose
financial statements, the auditor shall obtain an understanding of:

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 circumstance

In the case of special purpose financial statements, 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 statements

Planning Considerations

In planning and performing an audit of special purpose financial statements, the auditor
shall determine whether application of the PSAs requires special considerations in the
circumstance of the engagement.

Application of some of the requirements of the PSAs in an audit of special purpose
financial statements may require special consideration

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Auditing and Assurance Principles

by the auditor. For example, in PSA 320 (Revised and Redrafted), judgments about matters that
are materials to users of the financial statements are based on a consideration of the common
financial information needs of users as a group. In the case of an audit of special purpose
financial statement, however, those judgments are based on a consideration of the financial
information needs of the intended users.

The auditor to obtain an understanding of the entity’s selection and application of
accounting policies. In the case of financial statements 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 those financial
statements. An interpretation is significant when adoption of another reasonable interpretation
would have produced a material difference in the information presented in the financial
statements.

Reporting Considerations

When forming an opinion and reporting on special purpose financial statements, the
auditor shall apply the requirements in PSA 700 (Redrafted). PSA (Redrafted) requires the
auditor to evaluate whether the financial statements adequately refer to or describe the
applicable financial reporting framework.

In the case of financial statements prepared in accordance with the provisions of a
contract, the auditor shall evaluate whether the financial statements adequately describe any
significant interpretations of the contract on which the financial statements are based.

The following are required for reports on special purpose financial statements:

a. The auditor’s report shall also describe the purpose for which the financial statements
are prepared and, if necessary, the intended users, or refer to a note in the special
purpose financial statements that contains that information; and

b. If management has a choice of financial reporting frameworks in the preparation of such
financial statements, the explanation of the management’s responsibility for the financial
statements shall also make reference to its responsibility for determining that the
applicable financial reporting framework is acceptable in circumstances.

c. The report shall include and emphasis of matter paragraph alerting of the auditor’s report
that the financial statements are prepared in accordance with special purpose framework
and that as a result, the financial statements may not be suitable for another purpose.
The auditor shall include this paragraph under an appropriate heading.

The special purpose financial statements may be used for purposes other than those for
which they are intended. For example, a regulator may require certain entities to place
special purpose financial statements on public record. To avoid

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whether due to fraud or error. 2012 between ABC Company and DEF Company (the contract) Management’s Responsibility for the Financial Statements Management is responsible for the preparation of financial statements in accordance with the financial reporting provisions of Section Z of the contract. 2012. therefore. 558 . the auditor alerts users of the auditor’s report that the financial statements are prepared in accordance with special purpose framework and. We conducted our audit in accordance with Philippine Standards on Auditing. Depending on the law or regulation of the particular jurisdiction. In these circumstances the paragraph referred to letter c may be expanded to include these other matters. d. including the assessment of the risks of material misstatement of the financial statements. Exhibits 14-1 and 14-2 shows sample audit reports for statements prepared on other comprehensive accounting. statement of changes in equity and cash flow statement for the year then ended. may not be suitable for another purpose. which comprise the balance sheet as at December 31. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. In addition to the alert required by letter c.Chapter Fourteen – Special Considerations and Audits of Summary Financial Statements misunderstandings. this may be achieved by restricting the distribution or use of the auditor’s report. The financial statements have been prepared by management of ABC Company based on the financial reporting provisions of Section Z of the contract date January 1.Financial Statements Prepared in Accordance with the Provisions of a Contract INDEPENDENT AUDITOR’S REPORT [Appropriate Addressee] We have audited the accompanying financial statements of ABC company. whether due to fraud or error. and maintenance of internal control relevant to the preparation of financial statement. and the heading modified accordingly. The procedures selected depend on the auditor’s judgment. this includes the design. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. implementation. the auditor may consider it appropriate to indicate that the auditor's report is intended solely for the specific users. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. and the income statement. and a summary of significant accounting policies and other explanatory information. Exhibit 14-1 Sample Audit Report.

[Auditor’s signature] [Date of the auditor’s report] [Auditor’s address] Exhibit 14-2 Sample Audit Report.2012 are prepared. 2012 and the income statement for the year ended. implementation and maintenance of internal control… [same wording as in Exhibit 14-1] 559 .Financial Statements Prepared on the Entity’s Income Tax Basis INDEPENDENT AUDITOR’S REPORT [Appropriate Addressee] We have audited the accompanying financial statements of ABC Partnership. Auditing and Assurance Principles In making those risk assessments. this includes the design. Opinion In our opinion. the financial statements of ABC Company for the year ended December 31. the auditor considers internal control relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appropriate in circumstances. As a result. as well as evaluating the overall presentation of the financial statements. and a summary of significant accounting policies and other explanatory information. we draw attention to Note x to the financial statements. The financial statements are prepared to assist ABC Company to comply with financial reporting provisions of the contract referred to above. Management’s Responsibility for the Financial Statements Management is responsible for the preparation of these financial statements in accordance with the tax basis of accounting in Jurisdiction X. but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. which describes the basis of accounting. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management. in all material respects in accordance with the financial reporting provisions of Section Z of the contract. The financial statements have been prepared by management using tax basis of accounting in Jurisdiction X. which comprise the balance sheet as at December 31. Basis of Accounting and Restriction on Distribution and Use Without modifying our opinion. Our report is intended solely for ABC Company and DEF Company and should not be distributed to or used by parties other than ABC Company or DEF Company. the financial statements may not be suitable for another purpose. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

irrespective of whether the auditor is also engaged to audit the entity’s complete set of financial statements. The financial statements are prepared to assist the partners of ABC Partnership in preparing their individual income tax returns. we draw attention to Note X to the financial statements. 2012 are prepared. Acceptance of the Engagement In the case of an adult of a single financial statement or of a specific element ofa financial statement. the financial statements may not be suitable for another purpose. the financial statement of ABC Partnership for the year ended December 31. Opinion In our opinion. account or item of a financial statement:” A single financial statement refers to a component of a complete set of financial statement. We conducted our audit in accordance with… [same wording as in Exhibit 14-1] We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. the auditor shall 560 . The related notes ordinarily comprise a summary of significant accounting policies and other explanatory information relevant to the financial statement or to element. Basis of Accounting and Restriction on Distribution Without modifying our opinion. As a result. which describes the basis of accounting.Chapter Fourteen – Special Considerations and Audits of Summary Financial Statements Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. an element of a financial statement or simply element means an “element. in accordance with [describe the applicable income tax law] of Jurisdiction X. in all material respects. Accounts or Items of a Financial Statement For purposes of this section. acceptance and continuance procedures apply. such as the statement of financial position. Our report is intended solely for ABC Partnership and its partners and should not be distributed to parties other than ABC Partnership or [Auditor’s signature] [Date of the auditor’s report] [Auditor’s address] Audits of Single Financial Statements and Specific Elements. If the auditor is not also engaged to audit the entity’s complete set of financial statements.Such specific element of a financial statement includes the related notes.

as an auditor who also audits the entity’s complete set of financial statements. In the case of an audit of a specific element of a financial statement. The auditor also does not have the audit evidence about the general quality of the accounting records or other accounting information that would be acquired in an audit of the entity’s complete set of financial statements. Philippine Financial Reporting Standards). PSA 210 (Redrafted) requires that the agreed terms of the audit engagement include the expected form of any reports to be issued by 561 . In the case of an audit of a single financial statement or of a specific element of a financial statement. determination of the acceptability of the applicable framework may involve considering whether that framework includes all the requirements of the framework on which it is based that are relevant to the presentation of a single financial statement or of a specific element of a financial statement that provides adequate disclosures. Compliance with the requirements of PSAs relevant to the audit of a single financial statement or of a specific element of a financial statement may not be practicable when the auditor is not also engaged to audit the entity’s complete set of financial statements. the auditor may discuss with management whether another type of engagement might be more practicable.. If this is the case. PSA 210 (Redrafted) requires the auditor to determine the acceptability of the financial reporting framework applied in the preparation of the financial statements. certain PSAs require audit work that may be disproportionate to the element being audited. and the effect of material transactions and events on the information conveyed in the financial statement or the element. the auditor often does not have the same understanding of the entity and its environment. A single financial statement or a specific element of a financial statement may be prepared in accordance with applicable financial reporting framework that is based on a financial reporting framework established by an authorized or recognized standards setting organization for the preparation of a complete set of financial statements (e. In such cases. If the auditor concludes than an audit of a single financial statement or of a specific element of a financial statement in accordance with PSAs may not be practicable. this shall include whether application of the financial reporting framework will result in a presentation that provides adequate disclosures to enable the intended users to understand the information conveyed in the financial statement or the element.g. including its internal control. the auditor may need further evidence to corroborate audit evidence acquired from the accounting records. Auditing and Assurance Principles determine whether the auditor of a single financial statement or of a specific element of those financial statements in accordance with PSAs is practicable. For example although the requirements of PSA 570 (Redrafted) are likely to be relevant in the circumstances of an audit of a schedule of accounts receivable. Accordingly. complying with those requirements may not be practicable because of the audit effort required.

the auditor shall ask management to rectify the situation. When expressing an unmodified opinion on a complete set of financial statements prepared in accordance with a fair presentation framework. Reporting Considerations When performing an opinion and reporting on a single financial statement or on a specific element of a financial statement. In the case of an audit of a single financial statement or of a specific element of a financial statement. the auditor shall express a separate opinion for each engagement. unless otherwise required by law or regulation.Chapter Fourteen – Special Considerations and Audits of Summary Financial Statements the auditor. adapted as necessary in the circumstances of the engagement. the auditor shall adapt all PSAs relevant to the audit as necessary in the circumstances of the engagement. in accordance with [applicable financial framework]. the auditor shall consider whether the expected form of opinion is appropriate in the circumstances. The auditor shall also differentiate the opinion on the single financial statement or on the specific element of a financial statement from the opinion on 562 . in all material respects. The form of opinion to be expressed by the auditor depends on the applicable finacial reporting framework and any applicable laws or regulations. uses the phrase “the financial statements present fairly. Reporting on the Entity’s Complete Set of Financial Statements and on a Single Financial Statement or on a Specific Element of those Financial Statements If the auditor undertakes an engagement to report on a single financial statement or on a specific element of a financial statement in conjunction with an engagement to audit the entity’s complete set of financial statements. the auditor’s opinion. When expressing an unmodified opinion on a complete set of financial statements prepared in accordance with a compliance framework. in accordance with [the applicable financial reporting framework]. in all material respects. the auditor shall apply the requirements in PSA 700 (Redrafted).” and b. the auditor’s opinion states that the financial statements are prepared. If the auditor concludes that the presentation of the single financial statement or of the specific element of a financial statement does not differentiate it sufficiently form the complete set of financial statements. Planning Considerations In planning and performing the audit of a single financial statement or of a specific financial statement. An audited single financial statement or an audited specific element of a financial statement may be published together with the entity's audited complete set of financial statements. In accordance with PSA 700 (Redrafted): a.

If the opinion in the auditor’s report on an entity’s complete set of financial statements is modified. That opinion is expressed in an auditor’s report that is not published together with the auditor’s report that is not published together with the auditor’s report containing the adverse opinion or disclaimer of opinion. When deemed appropriate. This is because a single financial statement is deemed to constitute a major portion of those financial statements. the auditor shall only do so if: a. The auditor shall not issue the auditor’s report containing the opinion on the single financial statement or on the specific element of a financial statement until satisfied with the differentiation. in the context of a separate audit of a specific element that is included in those financial statements. or include an Emphasis of Matter paragraph or an Other Matter paragraph in the auditor’s report. Auditing and Assurance Principles complete set of financial statements. 563 . accordingly. the auditor shall modify the opinion on the single financial statement or on the specific element of a financial statement. or that report includes an Emphasis of Matter paragraph or Other Matter paragraph. The auditor shall not express an unmodified opinion on a single financial statement of a complete of financial statements if the auditor has expressed an adverse opinion or disclaimed an opinion on the complete set of financial statements as a whole. PSA 705 (Revised and Redrafted) does not permit the auditor to include in the same auditor’s report an unmodified opinion on a single financial statement that forms part of those financial statements or on a specific element that forms part of those financial statements. and c. The auditor is not prohibited by law or regulation from doing so. This is because such an unmodified opinion would contradict the adverse opinion or disclaimer of opinion on the entity’s complete set of financial statements as a whole. This is the case even if the auditor’s report on the single financial statement is not published together with the auditor’s report containing the adverse opinion or disclaimer of opinion. b. If the auditor concludes that it is necessary to express an adverse opinion or disclaim an opinion on the entity’s complete set of financial statements as a whole. the auditor shall determine the effect that this may have on the auditor’s report on a single financial statement or on a specific element of those financial statements. Modified Opinion. Emphasis of Matter Paragraph or Other Matter Paragraph in the Auditor’s Report on the Entity’s Complete Set of Financial Statements. If the auditor concludes that it is necessary to express an adverse opinion or disclaim an opinion on the entity’s complete set of financial statements as a whole but. the auditor nevertheless considers it appropriate to express an unmodified opinion on that element. The specific element does not constitute a major portion of the entity’s complete set of financial statements.

the financial statement presents fairly. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statement is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. if any. the financial position of ABC Company as at December 31. this includes the design. We conducted our audit in accordance with Philippine Standards on Auditing. as well as evaluating the overall presentation of the financial statement. in all material respects. [Auditor’s signature] [Date of the auditor’s report] [Auditor’s address] 564 . whether due to fraud or error. but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. The procedures selected depend on the auditor’s judgment. Auditor’s Responsibility Our responsibility is to express an opinion on the financial statement based on our audit. Management’s Responsibility for the Financial Statement Management is responsible for the preparation and fair presentation of this financial statement in accordance with those requirements of the Financial Reporting Framework in Jurisdiction X relevant to preparing such a financial statement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. including the assessment of the risks of material misstatement of the financial statement. whether due to fraud or error. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates. the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statement in order to design audit procedures that are appropriate in the circumstances. Opinion In our opinion. implementation and maintenance of internal control relevant to the preparation and fair presentation of the financial statement that is free from material misstatement. 2012 in accordance with those requirements of the Financial Reporting Framework in Jurisdiction X relevant to preparing such a financial statement. 2012 and a summary of significant accounting policies and other explanatory information (together “the financial statement”). In making those risk assessments.Chapter Fourteen – Special Considerations and Audits of Summary Financial Statements Exhibit 14-3 An auditor’s report on a single financial statement prepared in accordance with a general purpose framework INDEPENDENT AUDITOR’S REPORT [Appropriate Addressee] We have audited the accompanying balance sheet of ABC Company as at December 31. made by management.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. made by management. this includes determining that the cash receipts and disbursements basis of accounting is an acceptable basis for the preparation of the financial statement in the circumstances. including the assessment of the risks of material misstatement of the financial statements. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates. the cash receipts and disbursements of ABC Company for the year ended December 31. Auditing and Assurance Principles Exhibit 14-4 Auditor’s report on a statement of cash receipts and disbursements INDEPENDENT AUDITOR’S REPORT [Appropriate Addressee] We have audited the accompanying statement of cash receipts and disbursements of ABC Company for the year ended December 31. 2012 and a summary of significant accounting policies and other explanatory information (together “the financial statement”). whether due to fraud or error. whether due to fraud or error. The procedures selected depend on the auditor’s judgment. if any. In making those risk assessments. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statement is free from material misstatement. the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statement in order to design audit procedure that are appropriate in the circumstances. Auditor’s Responsibility Our responsibility is to express an opinion on the financial statement based on our audit. in all material respects. Management’s Responsibility for the Financial Statement Management is responsible for the preparation and fair presentation of this financial statement in accordance with the cash receipts and disbursements basis of accounting described in Note X. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. the financial statement presents fairly. as well as evaluating the overall presentation of the financial statement. implementation and maintenance of internal control relevant to the preparation and fair presentation of the financial statement that is free from material misstatement. and the design. Opinion In our opinion. The financial statement has been prepared by management using the cash receipts and disbursements basis of accounting described in Note X. We conducted our audited in accordance with Philippine Standards on Auditing. 2012 in accordance with the cash receipts and disbursements 565 . but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.

Throughout this section. Determine whether the applied criteria are acceptable. Basis of Accounting Without modifying our opinion. [Auditor’s signature] [Date of the auditor’s report] [Auditor’s address] Reports on Summary Financial Statements Summary financial statements refer to historical financial information that is derived from financial statements but that contains less detail than the financial statements. the statement may not be suitable for another purpose. Acceptance of the Engagement The auditor shall accept an engagement to report on summary financial statements only when the auditor has been engaged to conduct an audit in accordance with PSAs of the financial statements from which the summary financial statements are derived.Chapter Fourteen – Special Considerations and Audits of Summary Financial Statements basis of accounting described in Note X. while the criteria applied by management in the preparation of the summary financial statements are called applied criteria. As a result. the auditor shall: a. The financial statement is prepared to provide information to XYZ Creditor. if law or regulation provides that the audited financial statements need not be made available to the intended users of the summary financial statements and establishes the criteria for the preparation of the summary financial statements. the financial statements from which the summary financial statements are derived shall be called audited financial statements. while still providing a structured representation consistent with that provided by the financial statements of the entity’s economic resources or obligations at a point in time or the changes therein for a period of time. and 566 . b.  To make the audited financial statements available to the intended users of the summary financial statements without undue difficulty (or. to describe that law or regulation in the summary financial statements). which describes the basis of accounting. Before accepting an engagement to report on summary financial statements. Obtain the agreement of management that it acknowledges and understands its responsibility:  For the preparation of the summary financial statements in accordance with the applied criteria. we draw attention to Note X to the financial statement.

Planning Considerations The auditor shall perform the following procedures. Evaluate whether the summary financial statements adequately disclose their summarized nature and identify the audited financial statements. When summary financial statements are not accompanied by the audited financial statements. as the basis for the auditor’s opinion on the summary financial statements: a. The auditor shall also determine the effect that this may have on the engagements to audit the financial statements from which the summary financial statements are derived. Auditing and Assurance Principles 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. so as not to be misleading in the circumstances. the auditor’s report on the summary financial statements shall not indicate that the engagement was conducted in accordance with PSA 810. e. Compare the summary financial statements with the related information in the audited financial statements to determine whether the summary financial statements agree with or can be recalculated from the related information in the audited financial statements. and are at an appropriate level of aggregation. Agree with management the form of opinion to be expressed on the summary financial statements. Evaluate. Accordingly. whether the summary financial statements contain the information necessary. or  The law or regulation that specifies that the audited financial statements need not be made available to the intended users of the summary financial statements and establishes the criteria for the preparation of the summary financial statements. 567 . Evaluate whether the summary financial statements adequately disclose the applied criteria. c. f. evaluate whether they describe clearly:  From whom or where the audited financial statements are available. and any other procedures that the auditor may consider necessary. If the auditor concludes that the applied criteria are unacceptable or is unable to obtain the agreement of management on acknowledgement of responsibilities. Evaluate whether the summary financial statements are prepared in accordance with the applied criteria. b. The auditor shall include appropriate reference to this fact in the terms of the engagement. d. in view of the purpose of the summary financial statements. c. An engagement conducted in accordance with such law or regulation does not comply with PSA 810. the auditor shall not accept the engagement to report on the summary financial statements. unless required by law or regulation to do so.

The summary financial statements are a fair summary of the audited financial statements. Apply the procedure described in paragraph 8 and any further procedures necessary to enable the auditor to express the prescribed opinion. if so. and b. the auditor concludes that additional explanation in the auditor’s report on the summary financial statements cannot mitigate possible misunderstanding. If. the auditor’s report on the summary financial statements shall state that the summary financial statements and audited financial statements do not reflect the effects of events that occurred subsequent to the date of the auditor’s report on the audited financial statements that may require adjustments of. If law or regulation prescribes the wording of the opinion on summary financial statements in terms that are different from those described above. An engagement conducted in accordance with such law or regulation does not comply with PSA 810. the auditor shall: a. in accordance with [the applied criteria]. Evaluate whether the audited financial statements are available to the intended users of the summary financial statements without undue difficulty. in accordance with [the applied criteria]. the auditor shall not accept the engagement. 568 . or disclosure in. Reporting Considerations When the auditor has concluded that an unmodified opinion on the summary financial statements is appropriate. Accordingly. the audited financial statements. use one of the following phrases: a. Evaluate whether users of the summary financial statements might misunderstand the auditor’s opinion on the summary financial statements and. In such cases.Chapter Fourteen – Special Considerations and Audits of Summary Financial Statements g. with the audited financial statements. the auditor’s report on the summary financial statements shall not indicate that the engagement was conducted in accordance with PSA 810. Other Reporting Considerations The auditor’s report on the summary financial statements may be dated later than the date of the auditor’s report on the audited financial statements. unless otherwise required by law or regulation. The summary financial statements are consistent. the auditor’s opinion shall. in all material respects. unless law or regulation provides that they need not be made available and establishes the criteria for the preparation of the summary financial statements. unless required by law or regulation to do so. or b. whether additional explanation in the auditor’s report on the summary financial statements can mitigate possible misunderstanding.

9. Addressee. explaining that management is responsible for the preparation of the summary financial statements in accordance with the applied criteria. 6. Title clearly indicating that it is the report of an independent auditor. 7. A statement indicating that the summary financial statements do not contain all the disclosures required by the financial reporting framework applied in the preparation of the audited financial statements. The date on which the auditor has obtained sufficient 569 . A description of management’s responsibility for the summary financial statements. The auditor’s signature. Table 14-1 Basic Elements of a Report on Summary Financial Statements 1. the auditor shall not issue the auditor’s report on the summary financial statements until the auditor’s consideration of such facts in relation to the audited financial statements in accordance with PSA 560 (Redrafted) has been completed. 11. 3. An identification of the summary financial statements on which the auditor is reporting. states that the summary financial statements and the audited financial statements do not reflect the effects of events that occurred subsequent to the date of the auditor’s report on the audited financial statements. An identification of the audited financial statements from which the summarized financial statements were derived. If the addressee of the summary financial statements is not the same as the addressee of the auditor’s report on the audited financial statements. Auditing and Assurance Principles The auditor may become aware of facts that existed at the date of the auditor’s report on the audited financial statements. A statement that the auditor is responsible for expressing an opinion on the summary financial statements based on the procedures required by PSA 810. The auditor shall date the auditor’s report on the summary financial statements no earlier than: a. including the title of each statement included in the summary financial statements. and that reading the summary financial statements is not a substitute for reading the audited financial statements. the auditor shall evaluate the appropriateness of using a different addressee. 5. A paragraph clearly expressing an opinion. In such cases. The date of the auditor’s report. The auditor’s address. If the date of the auditor’s report on the summary financial statements is later than the date of the auditor’s report on the audited financial statements. 2. but of which the auditor previously was unaware. A reference to the date of the audit report on the audited financial statements and the type of opinion given in that report. 10. 4. 13. 12. 8.

Describe the basis for that adverse opinion or disclaimer of opinion. as a result of the adverse opinion or disclaimer of opinion. in accordance to the elements in Table 14-1: a. State that. with or are a fair summary of the audited financial statements. 570 . or an Other Matter paragraph. in accordance with the applied criteria. the auditor’s report on the summary financial statements shall. Emphasis of Matter Paragraph or Other Matter Paragraph in the Auditor’s Report on the Audited Financial Statements When the auditor’s report on the audited financial statements contains a qualified opinion. Modifications to the Opinion. in addition to the elements in Table 14-1: a. State that the auditor’s report on the audited financial statements contains an adverse opinion or disclaimer of opinion. and  The effect thereof on the summary financial statements. and that qualified opinion. an Emphasis of Matter paragraph. in all material respects. The date of the auditor’s report on the audited financial statements. When the auditor’s report on the audited financial statements contains an adverse opinion or a disclaimer of opinion. the auditor’s report on the summary financial statements shall. Describe:  The basis for the qualified opinion on the audited financial statements. and c. Modified Opinion on the Summary Financial Statements If the summary financial statements are not consistent. in all material respects. and b. b. State that the auditor’s report on the audited financial statements contains a qualified opinion. or an Other Matter paragraph. but the auditor is satisfied that the summary financial statements are consistent. the auditor shall express an adverse opinion on the summary financial statements. an Emphasis of Matter paragraph. with or are not a fair summary of the audited financial statements. it is inappropriate to express an opinion on the summary financial statements. including evidence that the summary financial statements have been prepared and those with the recognized authority have asserted that they have taken responsibility for them.Chapter Fourteen – Special Considerations and Audits of Summary Financial Statements appropriate evidence on which to base the opinion. or the Emphasis of Matter or the Other Matter paragraph in the auditor’s report on the audited financial statements. and management does not agree to make the necessary changes. and b. if any. in accordance with the applied criteria.

If the auditor concludes that the entity’s presentation of the unaudited supplementary information is not clearly differentiated from the summary financial statements. or the auditor’s report on the audited financial statements alerts readers that the audited financial statements are prepared in accordance with a special purpose framework. 571 . If. If. The auditor shall determine the effect of an unreasonable omission on the auditor’s report on the summary financial statements. the auditor shall explain in the auditor’s report on the summary financial statements that such information is not covered by that report. the auditor’s report on the summary financial statements shall also contain the matters that PSA 710 (Redrafted) requires the auditor to include in the auditor’s report on the audited financial statements. the auditor identifies a material inconsistency. on reading the other information. the auditor shall determine whether the summary financial statements or the other information needs to be revised. with the summary financial statements. the auditor shall include a similar restriction or alert in the auditor’s report on the summary financial statements. Unaudited Supplementary Information Presented with Summary Financial Statements The auditor shall evaluate whether any unaudited supplementary information presented with the summary financial statements is clearly differentiated from the summary financial statements. on reading the other information. If the summary financial statements contain comparatives that were reported on by another auditor. Comparatives If the audited financial statements contain comparatives. the auditor shall discuss the matter with management. the auditor shall determine whether such omission is reasonable in the circumstances of the engagement. Other Information in Documents Containing Summary Financial Statements The auditor shall read other information included in a document containing the summary financial statements and related auditor’s report to identify material inconsistencies. the auditor shall ask management to change the presentation of the unaudited supplementary information. Auditing and Assurance Principles Restriction on Distribution or Use or Alerting Readers to the Basis of Accounting When distribution or use of the auditor’s report on the audited financial statements is restricted. if any. the auditor becomes aware of an apparent material misstatement of fact. If management refuses to do so. but the summary financial statements do not.

572 . If management does not change the statement. If. delete the reference to the auditor. the auditor becomes aware that the entity plans to make a statement in a document that refers to the auditor and the fact that summary financial statements are derived from the financial statements audited by the auditor. 2012.Chapter Fourteen – Special Considerations and Audits of Summary Financial Statements Auditor Association If the auditor becomes aware that the entity plans to state that the auditor has reported on summary financial statements in a document containing the summary financial statements. The statement does not give the impression that the auditor has reported on the summary financial statements If (a) or (b) are not met. which comprise the summary balance sheet as at December 31. are derived from the audited financial statements of ABC Company for the year ended December 31. The auditor may be engaged to report on the financial statements of an entity. but does not plan to include the related auditor’s report. We expressed an unmodified audit opinion on those financial statements in our report dated February 15. and b. The reference to the auditor is made in the context of the auditor’s report on the audited financial statements. the summary income statement. the auditor shall advise management that the auditor disagrees with the reference to the auditor. and the summary financial statements. the auditor shall be satisfied that: a. Alternatively. and the auditor shall determine and carry out other appropriate actions designed to prevent management from inappropriately referring to the auditor. or not to refer to the auditor in the document. summary statement of changes in equity and summary cash flow statement for the year then ended. do not reflect the effects of events that occurred subsequent to the date of our report on those financial statements. 2012. while not engaged to report on the summary financial statements. Exhibit 14-5 Standard Report on Summary Financial Statements REPORT OF THE INDEPENDENT AUDITOR ON TH SUMMARY FINANCIAL STATEMENTS [Appropriate Addressee] The accompanying summary financial statements. the entity may engage the auditor to report on the summary financial statements and include the related auditor’s report in the document. If management does not do so. in this case. the auditor shall request management to changer the statement to meet them. 2012. or include an auditor’s report on the summary financial statements in the document containing the summary financial statements. and related notes. Those financial statements. the auditor shall determine and carry out other appropriate actions designed to prevent management from inappropriately associating the auditor with the summary financial statements in that document. the auditor shall request management to include the auditor’s report in the document.

PSA 800. Addressee. 3. therefore.” Opinion In our opinion. Management’s Responsibility for the Summary Financial Statements Management is responsible for the preparation of a summary of the audited financial statements in accordance with [describe established criteria]. Auditors issue special purpose audit reports when performing the following engagements: audits of financial statements prepared under special purpose framework. Understand the requirements of PSAs in issuing special reports. Describe the contents of special-purpose audit reports. is not a substitute for reading the audited financial statements of ABC Company. the gathering of sufficient. Special reports contain the following elements: a. the summary financial statements derived from the audited financial statements of ABC Company for the year ended December 31. which were conducted in accordance with Philippine Standard on Auditing (PSA) 810 (Revised and Redrafted). Identify the different engagements where auditors issue special purpose audit reports. in accordance with [describe established criteria]. Opening or introductory paragraph 573 . Auditing and Assurance Principles The summary financial statements do not contain all the disclosures required by [describe financial reporting framework applied in the preparation of the audited financial statements of ABC Company]. [Auditor’s signature] [Date of the auditor’s report] [Auditor’s address] Summary of Learning Objectives 1. and the issuance of the appropriate report. 20X1 are consistent. Reading the summary financial statements. and reporting on summary financial statements.PSAs requires proper planning of special purpose engagements. 2. reporting on single financial statements or elements of financial statements. in all material respects. b. “Engagements to Report on Summary Financial Statements. appropriate audit evidence. Auditor’s Responsibility Our responsibility is to express an opinion on the summary financial statements based on our procedures. with those financial statements. c. 805 and 810 further require the auditor to conform with the reporting format prescribed in the Standard. Title.

Auditing: An Assertions Approach. Ray and Kurt Pany. Principles of Auditing. Books Arens. PSA 200: General Principles Governing an Audit of Financial Statements AASC.Chapter Fourteen – Special Considerations and Audits of Summary Financial Statements d. Alvin A. 2. Accounts or Items of a Financial Statement AASC. Explain the nature of an engagement to report on components of the financial statements. Important Terms and Concepts Applied criteria Report on compliance Audit of components Report on summarized financial Audited financial statements statements Component Special-purpose audit engagements Compliance Special-purpose frameworks Comprehensive basis of accounting Single financial statements Element of financial statements Summary financial statements Acknowledgements and References Auditing Standards and Other Auditing Literature Auditing and Assurance Standards Council (AASC). What are examples of other comprehensive bases of accounting? 3. Auditing – An Integrated Approach. g. William Glezen. and James K. 2003 Taylor. Donald H. PSA 800 (Revised and Redrafted): Special Considerations – Audits of Financial Statements Prepared in Accordance with Special-purpose Frameworks AASC. f. O. Elenita B. A scope paragraph (describing the nature of an audit) e. 4. PSA 805 (Revised and Redrafted): Special Considerations – Audits of Single Financial Statements and Specific Elements. Give examples of special considerations regarding audit engagements. David N. Opinion paragraph containing an expression of opinion on the financial information. 2001. Riocchiute. PSA 810 (Revised and Redrafted): Engagements to Report on Summary Financial Statements International Auditing and Assurance Standards Board. Date of the report. and h. Why is it that reporting on a component results in a more extensive examination of an account compared to a report on the whole set of financial statements? 574 . and G. 2010 IAASB Handbook. Auditing and Assurance Services 7e. 1997 Whittington. Loebbecke. Auditor’s address. 7e. Auditor’s signature. 6e Cabrera. Principles of Auditing 11e Discussion Questions 1.

The CPA must ascertain that there is proper disclosure of the fact that the cash basis has been used. ____ 9. the prescribed format shall prevail over the requirements of PSA 800. ____ 5. Auditing and Assurance Principles 5. What are the restrictions to the auditor when reporting on summary financial statements? Objective Questions E14-1 True or False. The special report on modified cash basis financial statements need not include a statement that indicates the basis of accounting used. 7. When an adverse opinion or disclaimer of opinion on the entire financial statements has been expressed. ____ 3. When requested to report in a prescribed format which differs from the requirements of PSA 800. Unless the auditor has expressed an audit opinion on the financial statements from which the summarized financial statements were derived. Audit of components results in a report on the financial statements taken as a whole. A comprehensive basis of accounting comprises a set of criteria used in preparing financial statements which applies to selected material items and which has substantial support. the auditor should report on components of the financial statements only if those components are so extensive as to constitute a major portion of the financial statements. One of the major concerns in determining whether to accept an audit of compliance is the professional competence of the auditor. ____ 2. 575 . and the net effect of such omissions. the auditor should not report on summarized financial statements. ____ 8. ____ 6. the general nature of material items omitted. ____ 7. ____ 4. the auditor’s examination will ordinarily be less extensive than if the same component were to be audited in connection with a report on the entire financial statements. In an audit of components. Define summarized financial statements. What are the auditor’s considerations when reporting on compliance with contractual agreements? 6. A CPA has been engaged to audit financial statements that were prepared on a cash basis. ____ 1.

is to address appropriately the special considerations that are relevant to: A. Special-purpose financial statements D. Forming an opinion and reporting on the financial statements D. The objective of the auditor. I. 1. except: A. A. PSA 800 C. PSA 850 B. These are financial statements prepared in accordance with a special purpose framework. I. A financial reporting framework designed to meet the financial information needs of specific users. PSA 805 D. This PSA covers special considerations in audit engagements. such as a bond indenture. Philippine Standards on Special Reports B. or a project grant A. Particular purpose framework D. II. The financial reporting provisions of a contract. The financial reporting provisions established by a regular to meet the requirements of that regulator IV. Wordings such as “present fairly. The cash receipts and disbursements basis of accounting for cash flow information that an entity may be requested to prepare for creditors III. A tax basis of accounting for a set of FS that accompany an entity’s tax return II. E14-2 Multiple Choice. Customized financial reporting standards 5. I. II. a loan agreement. when applying PSAs in an audit of financial statements prepared in accordance with a special purpose framework. II and IV D. in all material respects” is not used by the auditor when expressing an opinion on summarized financial statements. III and IV B. III and IV 576 . Particular-use financial statements C. The planning and performance of that engagement C. Special purpose framework C.Chapter Fourteen – Special Considerations and Audits of Summary Financial Statements ____ 10. Examples of special-purpose frameworks are: I. All of the answers 3. The acceptance of the engagement B. II and III C. A. Specialized reporting statements 4. Modified financial statements B. PSA 810 2.

the auditor shall evaluate whether the FS adequately describe any significant interpretations of the contract on which the FS are based. C. D. The purpose for which the financial statements are prepared B. False. False. II. true C. In the case of FS prepared in accordance with the provisions of a contract. A. The intended users C. false D. In planning and performing an audit of special purpose FS. Auditing and Assurance Principles 6. Cost-benefit considerations in applying the framework. In determining the acceptability of the special-purpose financial reporting framework applied. All of these statements are incorrect. the auditor shall obtain an understanding of: A. True. The following are the considerations when planning and performing an audit of special- purpose FS. In an audit of special-purpose Fs. D. The auditor should determine the acceptability of the financial reporting framework applied in the preparation of FS. Select the incorrect statement: A. S1 When forming an opinion and reporting on special purpose FS. The financial information needs of the intended users 8. which of the following are additional reporting requirements mentioned by PSA 800? I. In the case of an auditor’s report on special-purpose FS. the auditor shall obtain an understanding of any significant interpretations of the contract that management made in the preparation of those FS. the auditor shall determine whether application of the PSAs requires special consideration in the circumstances of the engagement. B. the key factor is: A. True. Ease in auditing the FS produced under the special-purpose framework. C. Global acceptance of the special-purpose framework. An interpretation is insignificant when adoption of another reasonable interpretation would have produced a material difference in the information presented in the FS. if necessary. B. The steps taken by management to determine that the applicable financial reporting framework is acceptable in the circumstances D. The auditor’s report shall also describe the purpose for which the FS are prepared and. true B. or refer to a note in the special purpose FS that contains that information. the auditor shall apply the requirements in PSA 700 (Redrafted). PSA 700 (Redrafted) deals with the form and content of the auditor’s report. S2 In the case of FS prepared in accordance with the provisions of a contract. false 10. All of these 7. the intended users. 9. If management has a choice of financial reporting 577 .

By requiring the entity to add a paragraph in the notes to the financial statements to indicate the restriction. placed after the opinion paragraph. C. Restricts the distribution or use of the report D. the auditors may consider it appropriate to indicate that the auditor’s report is intended solely for the specific users. the financial statements may not be suitable for another purpose. III. Describes the purpose of the special-purpose FS C. Withdraw from the engagement. reads as follows: Without modifying our opinion. By issuing a qualified opinion or adverse opinion on the financial statements. Reword the title of the financial statements. we draw attention to Note X to the financial statements. The financial statements are prepared to assist ABC Company to comply with the financial reporting provisions of the contract referred to above. the explanation of management’s responsibility for the FS shall also make reference to its responsibility for determining that the applicable financial reporting framework is acceptable in the circumstances. If the special-purpose FS is not suitably titled or the basis of accounting is not adequately disclosed. In addition to this alert. As a result. The auditor’s report on special purpose FS shall include an Emphasis of Matter paragraph alerting users of the auditor’s report that the FS are prepared in accordance with a special purpose framework and that. C. II and III 11. I and III only B.Chapter Fourteen – Special Considerations and Audits of Summary Financial Statements frameworks in the preparation of such FS. II and III only D. Depending on the law or regulation of the particular jurisdiction. By modifying the title of the auditor’s report. All of the answers 13. as a result. how is this normally achieved? A. 578 . B. which describe the basis of accounting. Our report is intended solely for ABC Company and DEF Company and should not be distributed to or used by parties other than ABC Company or DEF Company. I. I and II only C. such as “Restricted Report of Independent Auditor” 12. D. PSA 800 (Redrafted) requires that the auditor’s report should include an alert on the special-purpose for which the FS have been prepared. Issue an appropriately modified report. the financial statements may not be suitable for another purpose. By restricting the distribution or use of the auditor’s report. B. This paragraph: A. the auditor should: A. A paragraph in the auditor’s report. A. Refers to the basis of accounting by mention of a note to the FS B.

Part of financial statements D. Auditing and Assurance Principles D. (4). or item of a financial statement. If the auditor is not also engaged to audit the entity’s complete set of FS. (4). including explanatory notes. including related notes. account. A. (3) C. Element of financial statements B. (1). 579 . All of these are correct statements 17. the auditor shall determine whether the audit of a single FS or of a specific element of those FS in accordance with PSAs is practicable. (1). Which of the following are specific. or the liability for “incurred but not reported” claims in an insurance portfolio. (4) D. including related notes (2) A schedule of externally managed assets and income of a private pension plan. (1). (3). B. and the effect of material transactions and events on the information conveyed in the FS or the element. (2). A. accounts. (5) A schedule of profit participation or employee bonuses. Component C. S1 When auditing a single FS or an element of FS. (3) A schedule of net tangible assets. it is not necessary to examine evidence pertaining accounts that are related to the single FS or element of FS being audited. as well as the audit of a single financial statement or of a specific element of the FS. (4) A schedule of disbursements in relation to a lease property. In the case of an audit of a single FS or of a specific element of FS. This refers to an element. C. the recorded value of identified intangible assets. (5) 16. including related notes. allowance for doubtful accounts receivable. Financial statement category 15. the liability for accrued benefits of a private pension plan. (3). elements. (2). An auditor may be engaged to audit the entity’s complete set of FS. or items of a financial statement? (1) Accounts receivable. 14. The following statements relate to PSA 805. (5) B. D. (1). (3). Request for an additional representation in the management representation letter. inventory. Select the incorrect statement: A. the auditor shall consider whether application of the financial reporting framework will result in a presentation that provides adequate disclosures to enable the intended users to understand the information conveyed in the FS or the element. including explanatory notes.

Jude issued a report with modified opinion on the complete set of FS of Isaac Company. Jude issued a report with unqualified opinion and with emphasis of a matter paragraph on the complete set of FS of Isaac Company. D. Issue a disclaimer of opinion on the Loans and Receivables account. Neither A nor B 20. Accordingly. true C. Jude. in conjunction with the audit of Isaac’s complete FS. 580 . Issue a qualified opinion on the Loans and Receivables account. in conjunction with the audit of Isaac’s complete FS. Jude shall: A. Accordingly. 19. False. When audited single FS or audited specific element of FS are presented together with the audited complete set of FS. the following must be differentiated: A. was asked by Isaac Company to audit the company’s Loans and Receivables account. Issue also an unqualified opinion with emphasis of a matter paragraph for Loans and Receivables. If the auditor undertakes an engagement to report on a single FS or on a specific element of FS in conjunction with an engagement to audit the entity’s complete set of FS. A single opinion covering both the single FS or specific element of FS and the completed set of FS. false D. C. C. True. False. An opinion on the single FS or on the specific element of the FS only. CPA. false 18. The single FS or specific element of FS must be differentiated from the complete set of FS B. A. CPA. Jude. True. The opinion for the single FS or specific element of FS must be differentiated from the opinion on the complete set of FS C. the auditor shall express: A. Issue a qualified opinion on the Loans and Receivables account. C. B. Both A and B D. Issue also an unqualified opinion with emphasis of a matter paragraph for Loans and Receivables. Issue a disclaimer of opinion on the Loans and Receivables account. Consider the effect of the emphasis of a matter on the auditor’s report for Loans and Receivables D. An opinion on the complete set of FS only.Chapter Fourteen – Special Considerations and Audits of Summary Financial Statements S2 The materiality determined for a single FS or an element of FS may be lower than the materiality determined for the entity’s complete set of FS. true B. A separate opinion for each engagement. B. Consider the effect of the emphasis of a matter on the auditor’s report for Loans and Receivables D. B. was asked by Isaac Company to audit the company’s Loans and Receivables account. 21. Jude shall: A.

the auditor shall only do so if: A. is allowed only if such unmodified opinion is published separately from the auditor’s report containing the adverse opinion or disclaimer of opinion. These are FS audited by the auditor in accordance with PSAs. Uncut financial statements 26. Source financial statements B. Auditing and Assurance Principles 22. S2 Expressing an unmodified opinion on a single FS which came from a complete set of FS that was given adverse opinion or disclaimer of opinion. True. S1 The auditor shall not express an unmodified opinion on a single FS of a complete set of FS if the auditor has expressed an adverse opinion or disclaimed an opinion on the complete set of FS as a whole. false. are known as: A. Simplified financial statements B. All of these 23. true 24. A. S3 A single FS is always deemed to constitute a major portion of a complete set of FS. false C. True. Summary reporting standards 25. Financial reporting framework D. Historical financial information that is derived from FS but that contains less detail than the FS. and from which the summary FS are derived: A. while still providing a structured representation consistent with that provided by the FS of the entity’s economic resources or obligations at a point in time or the changes therein for a period of time. Original financial statements D. Compressed financial statements 581 . True. true D. in the context of a separate audit of a specific element that is included in those FS. The criteria applied by management in the preparation of the summary FS is known as: A. false. Audited financial statements C. The auditor is not prohibited by law or regulation from doing so B. true. false. If the auditor concludes that it is necessary to express an adverse opinion or disclaim an opinion on the entity’s complete set of FS as a whole but. Applied criteria B. That opinion is expressed in an auditor’s report that is not published together with the auditor’s report containing the adverse opinion or disclaimer of opinion C. The specific element does not constitute a major portion of the entity’s complete set of FS D. false B. False. the auditor nevertheless considers it appropriate to express an unmodified opinion on that element. Summary criteria C.

In the context of PSA 810 (Redrafted). Dorothy. C. When summary FS are not accompanied by the audited FS. the auditor shall: A. Based solely on this information. All of the choices. evaluate whether they describe clearly from whom or where the audited FS are available C. For the preparation of the summary FS in accordance with the applied criteria B. B. 582 . D. All of the choices. 28. Compare the summary FS with the related information in the audited FS to determine whether the audited FS agree with. Yes. the related information in the summary FS. C. because an audit of summary FS is comparable to the audit of FS from which such summary FS are derived. Evaluate whether the summary financial statements adequately disclose the applied criteria D. None of the above choices can be selected because of lack of information. Yes. Abridged financial statements 27. 30. because PSA 810 (Redrafted) mandates that the auditor should only accept an engagement to report on summary FS only when the auditor has been engaged to conduct an audit of the FS from which the summary FS are derived. To make the audited FS available to the intended users of the summary FS without undue difficulty C. Determine whether the applied criteria are acceptable. Agree with management the form of opinion to be expressed on the summary FS.Chapter Fourteen – Special Considerations and Audits of Summary Financial Statements C. Dorothy has not expressed an audit opinion on the FS from which the summary FS were derived. should Dorothy accept the engagement? A. Evaluate whether the summary FS adequately disclose their summarized nature and identify the audited FS B. Summary financial statements D. No. D. Before accepting an engagement to audit summary FS. To include the auditor’s report on the summary FS in any document that contains the summary FS and that indicates that the auditor has reported on them D. Which of the following procedures are least likely to be performed in relation to an engagement to report on summary FS? A. 29. management should agree with the auditor and acknowledgement its responsibilities: A. CPA. Inc. Obtain the agreement of management that it acknowledges and understands its responsibilities regarding the summary FS. because a report on summary FS is a separate engagement B. or can be recalculated from. is requested to report on summary FS of Lock Books.

if so. S2 In case previously unidentified subsequent events occurred between the date of the auditor’s report on audited FS and the date of the auditor’s report on the summary FS. in accordance with [the applied criteria] A. false 35. Evaluate. The summary FS are a fair summary of the audited FS. All of the choices. Which of the following phrases are acceptable forms of unmodified opinion on summary FS? I. True. D. whether additional explanation in the auditor’s report on the summary FS can mitigate possible misunderstanding. true C. Both I and II B. S1 The auditor’s report on summary FS may be dated later than the date of the auditor’s report on audited FS. in accordance with [the applied criteria] II. Auditing and Assurance Principles 31. II only D. unless law or regulation provides that they need not be made available and establishes the criteria for the preparation of the summary FS. true B. False. in all material respects. including the title of each statement included in the summary FS. Evaluate whether the audited FS are available to the intended users of the summary FS without undue difficulty. false D. C. The summary FS are consistent. and B. Which of the following procedures are most likely to be performed in relation to an engagement to report on summary FS? A. 32. with the audited FS. Neither I nor II 33. The introductory paragraph of an auditor’s report on summary FS shall: A. in view of the purpose of the summary FS. and are at an appropriate level of aggregation. True. Neither A nor B 34. the auditor shall: A. Identify the summary FS on which the auditor is reporting. 583 . B. so as not to be misleading in the circumstances C. Both A and B D. Apply the procedures necessary to enable the auditor to express the prescribed opinion. If law or regulation prescribes the wording of the opinion on summary FS in terms that are different from those described in PSA 810 (Redrafted). Evaluate whether users of the summary FS might misunderstand the auditor’s opinion on the summary FS and. whether the summary FS contain the information necessary. False. the report on the summary FS shall not be issued until the auditor’s consideration of such subsequent events has been completed. I only C. A. Evaluate whether the summary FS are prepared in accordance with the applied criteria.

Both I and II B. I only C. the auditor’s report on the summary FS shall: A. or an Other Matter paragraph. Withdraw from the engagement and issue a letter to management detailing the reasons thereto. 38. All of the choices 36. When the auditor’s report on the audited FS contains a qualified opinion. False. If the addressee of the summary FS is not the same as the addressee of the auditor’s report on the audited FS. or an Other Matter paragraph 584 .Chapter Fourteen – Special Considerations and Audits of Summary Financial Statements B. but the auditor is satisfied that the summary FS are consistent. II only D. The date on which the auditor has obtained sufficient appropriate evidence on which to base the opinion. in all material respects. true 37. the auditor’s report should state that the summary FS and the audited FS do not reflect the effects of events that occurred subsequent to the date of the auditor’s report on the audited FS. C. Mention the difference in an other matter paragraph after the opinion and emphasis of a matter paragraphs. D. in accordance with the applied criteria. S1 If the date of the auditor’s report on the summary FS is later than the date of the auditor’s report on the audited FS. The auditor shall date the auditor’s report on the summary financial statements no earlier than: I. true. State that the auditor’s report on the audited FS contains a qualified opinion. S2 Summary FS do not contain all the disclosures required by the financial reporting framework applied in the preparation of the audited FS. the date of that report. true. false C. with or are a fair summary of the audited FS. A. True. Neither I nor II 39. an Emphasis of Matter paragraph. Issue a disclaimer of opinion. False. Refers to the auditor’s report on the audited FS. II. an Emphasis of Matter paragraph. True. S3 If done correctly. B. true D. A. false B. The date of the auditor’s report on the audited FS. Identify the audited FS C. reading the summary FS is a substitute for reading the audited FS. Evaluate the appropriateness of using a different addressee. including evidence that the summary FS have been prepared and those with the recognized authority have asserted that they have taken responsibility for them. and the fact that an unmodified opinion is expressed on the audited FS D. true. true. the auditor shall: A.

All of the answers 41. If the summary FS are not considered. The 2009 financial statements were not presented.. Express an adverse opinion on the summary FS. in all material respects. or the Emphasis of Matter or the Other Matter paragraph in the auditor’s report on the audited FS C. Discussion Case Case 1 – Comprehensive Case on Special-Purpose Audits Raymond & Co. Assume that the financial statements of Trillo Corporation are suitably titled. Describe the effect thereof on the summary FS. as a result of the adverse opinion or disclaimer of opinion. with an emphasis of a matter paragraph describing the lack of consistency. Describe the basis for that adverse opinion or disclaimer of opinion C. Auditing and Assurance Principles B. of the reasons for qualified opinion. C. Describe the basis for the qualified opinion on the audited FS. State that. with or are not a fair summary of the audited FS. a competitor of Trillo. Express an unqualified opinion on the summary FS. The amount of damages. with a basis for modification paragraph describing the lack of consistency. and that qualified opinion. All of the answers. D. State that the auditor’s report on the audited FS contains an adverse opinion or disclaimer of opinion B. B. CPAs. if any. D. the auditor’s report on the summary FS shall: A. resulting from this litigation could not be determined as of the time of completion of the engagement. Express a qualified opinion on the summary FS. The financial statements are prepared under the income tax (cash) basis. has just completed the audit of the financial statements of Trillo Corporation for the year ended December 31. 40. in accordance with the applied criteria. 585 . it is inappropriate to express an opinion on the summary FS D. and management does not agree to make the necessary changes. 2010. the auditor shall: A. or other matter paragraph in the auditor’s report on the audited FS. including notes that indicate that Trillo is involved in continuing litigation. The case involves material amounts and is related to alleged infringement of the patent of Honeybee. Withdraw from the engagement since management refuses to make amendments to the summary FS. When the auditor’s report on the audited FS contains an adverse opinion or a disclaimer of opinion. if any. or emphasis of a matter.

Include any appropriate explanatory disclosures. following the requirements of PSA 800.Chapter Fourteen – Special Considerations and Audits of Summary Financial Statements Requirement: Based solely on the information presented. draft Raymond’s special audit report for this engagement. 586 .