Advance Auditing & Assurance

Quick Revision Notes for CAP III

Chapter 13: Standards in Special Circumstances

Chapter 14: Assurance Related Standards

Coverage: NSA 800 , NSA 805 , NSA 810

NSRE 2400, NSRE 2410, NSRE 4400, NSRE 4410

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 NSA 800:
Special Considerations- Audit of Financial Statements Prepared In
Accordance With Special Purpose Framework

NSA 805
Special Considerations- Audit of Single Financial Statements and Specific
Elements, Accounts Or Items of Financial Statements

NSA 810
Engagement to Report on Summary Financial Statements

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Other Standards For Practitioner
NSRE 2400
Engagement to Review Historical Financial Statements

NSRE 2410
Review of Interim Financial Information Performed by the Independent Auditor
of the Entity

NSRS 4400
Engagements to Perform Agreed Upon Procedures Regarding Financial
Information

NSRS 4410
Compilation Engagements

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NSA 800: SPECIAL CONSIDERATIONS—AUDITS OF FINANCIAL STATEMENTS
PREPARED IN ACCORDANCE WITH SPECIAL PURPOSE FRAMEWORKS

 What is Special Purpose Framework?

 A financial reporting framework designed to meet the financial
information needs of specific users is known as Special Purpose
Framework. The financial reporting framework may be a fair presentation
framework or a compliance framework

 What are Special Purpose Financial Statements?

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

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Considerations
 Acceptance & Continuance
 Planning the Audit & Performing the
engagement
 Documentation

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Opinion & Reporting
 Requirements of NSA 700
 Requirements of NSA 701, 570, 705, 706
 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.

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Alerting Readers
 The auditor’s report on special purpose financial statements
shall include an Emphasis of Matter paragraph alerting users
of the auditor’s report that the financial statements are
prepared in accordance with a special purpose framework
and that, as a result, the financial statements may not be suitable
for another purpose.

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 NSA 805: SPECIAL CONSIDERATIONS— AUDITS OF SINGLE
FINANCIAL STATEMENTS AND SPECIFIC ELEMENTS, ACCOUNTS OR
ITEMS OF A FINANCIAL STATEMENT
 Examples of Specific Elements, Accounts or Items of a Financial
Statement
 Accounts receivable, allowance for doubtful accounts receivable, inventory, the
liability for accrued benefits of a private pension plan, the recorded value of
identified intangible assets, or the liability for “incurred but not reported” claims in
an insurance portfolio, including related notes.
 A schedule of externally managed assets and income of a private pension plan,
including related notes.
 A schedule of net tangible assets, including related notes.
 A schedule of disbursements in relation to a lease property, including explanatory
notes.
 A schedule of profit participation or employee bonuses, including explanatory
notes.

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Considerations
 Acceptance & Continuance
 Planning the Audit & Performing the
engagement
 Documentation

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Forming an Opinion and Reporting
Considerations
 When forming an opinion and reporting on a single financial statement
or on a specific element of a financial statement, the auditor shall apply
the requirements in NSA 700 , and, when applicable, NSA 800 adapted
as necessary in the circumstances of the engagement.
 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 shall express a separate opinion for
each engagement.
 The audited single financial statement or the audited specific element of
a financial statement may be published together with the entity’s audited
complete set of financial statements

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ADVERSE Or. DISCLAIMER OPINION
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, NSA 705 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 of those financial
statements

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NSA 810: ENGAGEMENTS TO REPORT ON SUMMARY
FINANCIAL STATEMENTS (SFS)

 Meaning of SFS
 Historical financial information that is derived from financial
statements but that contains less detail than the 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.

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Engagement Acceptance
 The auditor shall accept an engagement to report on summary
financial statements in accordance with this NSA only when the
auditor has been engaged to conduct an audit in
accordance with NSAs of the financial statements from
which the summary financial statements are derived

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Timing of Work and Events Subsequent to the Date of the Auditor’s
Report on the Audited Financial Statements

 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.
 In such cases, 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
 Provisions of NSA 560 are to be considered.

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Auditor Engaged to Report on Financial Statements
But not on Summary Financial Statements

 The auditor may be engaged to report on the financial statements of

an entity, while not engaged to report on the summary financial
statements. If, in this case, 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, the auditor shall
be satisfied that:
 The reference to the auditor is made in the context of the
auditor’s report on the audited financial statements; and
 The statement does not give the impression that the auditor
has reported on the summary financial statements.

 (Otherwise Take Appropriate Action)

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Review Engagements
 A review engagement is less extensive than an audit engagement. In an
audit engagement, the auditor is required to perform more procedures to obtain
sufficient appropriate audit evidence before expressing an opinion (i.e. a positive
assurance), whereas in Review engagement only basic procedures such as
enquiries and analytical procedures are used to obtain evidence.

 Therefore in review engagements, a negative assurance is provided.

 Reviews of financial statements may be performed for a wide range of entities

that vary by type or size, or by the level of complexity in their financial reporting.
 Reviews may be performed in a variety of circumstances. For example, they may
be required for entities that are exempt from requirements specified in law or
regulation for mandatory audit. Reviews may also be requested on a voluntary
basis, such as in connection with financial reporting undertaken for arrangements
under the terms of a private contract, or to support funding arrangements.

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Standards on Related Services
 Related Services:
◦ Agreed Upon Procedures
◦ Compilation Engagements

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Agreed Upon Procedures
 Verification of Assets
 Identification of Tax Liabilities
 Account Receivables / Payables verification
 Review of Loan Portfolio
 Royalty agreement compliances
 Internal Control Reviews
 Due Diligence while buying & selling
businesses etc.
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Compilation Engagement
 An engagement in which a practitioner applies accounting
and financial reporting expertise to assist management
in the preparation and presentation of financial
information of an entity in accordance with an applicable
financial reporting framework, and reports as required by this
NSRS. Throughout this NSRS, the words “compile”,
“compiling” and “compiled” are used in this context.

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--------END OF CHAPTER--------

Pc: The Inspiring Journal

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