19.

Special-Purpose Audit Engagements

References:
1. PSA 800, Special Considerations—Audits of Financial Statements Prepared in Accordance with
Special Purpose
Frameworks
2. PSA 805, Special Considerations—Audits of Single Financial Statements and Specific Elements,
Accounts or Items of
a Financial Statement
3. PSA 810, Engagements to Report on Summary Financial Statements

LECTURE NOTES
Comparison of Financial Statements-Related Audit Engagements

Audits of A Audits of A Audits of Single Engagements to

Complete Set of Complete Set of Financial Report (Not to
General Purpose Special Purpose Statement and Audit) on
Financial Financial Specific Summary
Statements Statements Elements, Financial
Accounts, or Statements
Items of
a Financial
Statement
Subject Matter A complete set of A complete set of A single financial Summary of
general-purpose special purpose statements or general
financial financial specific item of a purpose or
statements statements financial special
statements that purpose financial
may be of general statements
purpose or
special purpose
financial
statements
Financial General purpose Special purpose General purpose Certain applied
Reporting (e.g., PFRSs, (e.g., cash basis, or criteria
Framework PFRS for regulatory special purpose used by
SMEs) financial reporting management to
frameworks, prepare summary
contracts) financial
statements
Auditor’s Whether financial Whether financial Whether financial Whether
Opinion statements statements are statements (or the summary
present fairly… prepared… specific financial financial
information) statements are
present consistent with (or
fairly… a fair
summary of) the
audited
financial
statements …

Emphasis of Only when Required in order (1) General (1) General

Matter in the necessary to alert users of purpose— only purpose—
auditor’s specialized nature when necessary only when
report of the financial or (2) Special necessary or
statements purpose— (2) Special
required purpose—
required
 Report Not restricted May be restricted (1) General (1) General
Restriction purpose— purpose—not
not restricted or restricted or (2)
(2) Special Special
purpose—may be purpose—may be
restricted restricted

Engagement Consider Accept an

Acceptance practicality of engagement to
Special accepting the report on
Considerations engagement summary
when the financial
auditor is not also statements only
engaged to audit when engaged to
the conduct
entity’s complete an audit of the
set of financial
financial statements from
statements which
the summary
financial
statements are
derived.

Auditor’s Report: Lack of Independence

Under PSA 220, the auditor shall conclude compliance with independence requirements. In doing so,
the auditor shall:
a. Evaluate circumstances and relationships that create threats to independence; and
b. Take appropriate action to eliminate such threats or reduce them to an acceptable level by
applying safeguards, or, if considered appropriate, to withdraw from the audit engagement, where
withdrawal is permitted by law or regulation.

However, it is not clear under the Philippine and International Standards as to what opinion to
express in case the auditor is not permitted to withdraw from the engagement as required by law or
regulation. At this point, we refer to AICPA AU-C Section 705, par. 19, which states “when the auditor
is not independent but is required by law or regulation to report on the financial statements, the
auditor should disclaim an opinion and should specifically state that the auditor is not independent.
The auditor is neither required to provide, nor precluded from providing, the reasons for the lack of
independence; however, if the auditor chooses to provide the reasons for the lack of independence,
the auditor should include all the reasons therefor.” Examples of reasons may include:
1. A member of the engagement team had a direct financial interest in XYZ company.
2. An individual of my immediate family was employed by XYZ company.
3. The auditor performed certain accounting services that impaired the auditor’s independence.