Specialised Areas in Auditing: SA 800, SA 805, and SA 810

Flashcards covering key principles, rules, scope, and reporting aspects under Standards on Auditing SA 800, SA 805, and SA 810.

What does SA 800 deal with?

SA 800 deals with special considerations applicable in respect of the audit of financial statements prepared in accordance with special purpose frameworks.

What is a special purpose framework as defined by SA 800?

A special purpose framework is a financial reporting framework designed to meet the financial information needs of specific users. It may be a fair presentation framework or a compliance framework.

How does a general purpose framework differ from a special purpose framework?

A general purpose framework is designed to meet the common financial information needs of a wide range of users, whereas a special purpose framework is designed to meet the financial information needs of specific users.

What are three examples of special purpose frameworks mentioned in SA 800?

1) The cash basis of accounting and cash flow information prepared for creditors, 2) Financial reporting provisions established by a regulator, and 3) Financial reporting provisions of a contract such as a bond indenture, loan agreement, or project grant.

How does the determination of materiality under SA 320 differ when auditing special purpose financial statements?

In general purpose financial statements, materiality judgments are based on the common financial information needs of users as a group, whereas in special purpose financial statements, judgments are based on the financial information needs of the intended users.

Does an agreed threshold between management and intended users for uncorrected misstatements relieve the auditor of determining materiality under SA 320?

No. The existence of an agreed threshold below which misstatements will not be corrected does not relieve the auditor from determining materiality in accordance with SA 320 for planning and performing the audit.

Why does the auditor include an Emphasis of Matter paragraph in an audit report on special purpose financial statements?

To alert users that the financial statements are prepared in accordance with a special purpose framework and, therefore, may not be suitable for another purpose.

What scope does SA 805 cover?

SA 805 deals with special considerations applicable to an audit of a single financial statement or of a specific element, account, or item of a financial statement.

Does SA 805 apply to the report of a component auditor issued for consolidated financial statement audits?

No. SA 805 does not apply to the report of a component auditor issued as a result of work performed on the financial information of a component at the request of a principal auditor for purposes of an audit of consolidated financial statements.

What are examples of specific elements, accounts, or items of a financial statement under SA 805?

Examples include accounts receivable, inventory, trade payables, cash and bank balances, schedule of net tangible assets, schedule of disbursements for a lease property, and schedule of profit participation or employee bonuses.

Why might auditing a single financial statement or specific element be impractical if the auditor is not engaged to audit the complete set of financial statements?

The auditor lacks the overall understanding of the entity and its internal control, as well as audit evidence regarding the general quality of accounting records that would be acquired in an audit of the complete set of financial statements.

Under what conditions can an auditor express an unmodified opinion on a specific element if an adverse opinion or disclaimer of opinion was expressed on the complete set of financial statements?

Only if: 1) The auditor is not prohibited by law or regulation from doing so, 2) The opinion is expressed in an auditor's report not published together with the adverse/disclaimer report, and 3) The element does not constitute a major portion of the complete set of financial statements.

Can an auditor express an unmodified opinion on a single financial statement if an adverse opinion or disclaimer was issued on the complete set of financial statements in a separate report?

No. An auditor cannot express an unmodified opinion on a single financial statement if an adverse or disclaimer of opinion was expressed on the complete set as a whole, even in a separate report, because a single financial statement is deemed to constitute a major portion of those financial statements.

What does SA 810 deal with?

SA 810 deals with the responsibilities of an auditor when undertaking an engagement to report on summary financial statements derived from financial statements audited in accordance with SAs by that same auditor.

Why must the auditor engaged to report on summary financial statements ordinarily be the same auditor who audited the main financial statements?

Because an auditor who has not audited the financial statements from which the summary financial statements are derived does not have the necessary knowledge to discharge responsibilities in relation to the summary financial statements under SA 810.

What factors affect the auditor's determination of the acceptability of the applied criteria under SA 810?

1) The nature of the entity, 2) The purpose of the summary financial statements, 3) The information needs of the intended users, and 4) Whether the applied criteria will result in summary financial statements that are not misleading in the circumstances.

What phrasing options are acceptable for an unmodified opinion on summary financial statements under SA 810?

1) 'The accompanying summary financial statements are consistent, in all material respects, with the audited financial statements, in accordance with [applied criteria]' OR 2) 'The accompanying summary financial statements are a fair summary of the audited financial statements, in accordance with [applied criteria]'.

What must the auditor's report on summary financial statements state if it is dated later than the auditor's report on the audited financial statements?

It shall state 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.

What opinion should an auditor express under SA 810 if summary financial statements are not consistent with the audited financial statements and management refuses to make changes?

The auditor shall express an adverse opinion on the summary financial statements.

How does an auditor report on summary financial statements if the audit report on the main financial statements contained an adverse opinion or a disclaimer of opinion?

The auditor's report on the summary financial statements shall state that the audit report contains an adverse or disclaimer of opinion, describe the basis for that opinion, and state that as a result, it is inappropriate to express an opinion on the summary financial statements.