ISA 800

INTERNATIONAL STANDARD ON AUDITING 800 SPECIAL CONSIDERATIONSAUDITS OF FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH SPECIAL PURPOSE FRAMEWORKS (Effective for audits for periods beginning on or after December 15, 2009) CONTENTS Introduction Scope of this ISA Effective Date Objective Definitions Requirements Considerations When Accepting the Engagement Considerations When Planning and Performing the Audit Forming an Opinion and Reporting Considerations Application and Other Explanatory Material Definition of Special Purpose Framework Considerations When Accepting the Engagement Considerations When Planning and Performing the Audit Forming an Opinion and Reporting Considerations Appendix: Illustrations of Auditors Reports on Special Purpose Financial Statements Paragraph 1-3 4 5 6-7 8 9 - 10 11 - 14 A1 - A4 A5 - A8 A9 - A12 A13 - A15

International Standard on Auditing (ISA) 800, Special ConsiderationsAudits of Financial Statements Prep Frameworks should be read in conjunction with ISA 200, Overall Objectives of the Independent Auditor an International Standards on Auditing.

Introduction Scope of this ISA 1. The International Standards on Auditing (ISAs) in the 100-700 series apply to an audit of financial statements. This ISA deals with special considerations in the application of those ISAs to an audit of financial statements prepared in accordance with a special purpose framework. 2. This ISA is written in the context of a complete set of financial statements prepared in accordance with a special purpose framework. ISA 805 deals with special

considerations relevant to an audit of a single financial statement or of a specific element, account or item of a financial statement. 3. This ISA does not override the requirements of the other ISAs; nor does it purport to deal with all special considerations that may be relevant in the circumstances of the engagement. Effective Date 4. This ISA is effective for audits of financial statements for periods beginning on or after December 15, 2009. Objective 5. The objective of the auditor, when applying ISAs in an audit of financial statements prepared in accordance with a special purpose framework, is to address appropriately the special considerations that are relevant to: 1. The acceptance of the engagement; 2. The planning and performance of that engagement; and 3. Forming an opinion and reporting on the financial statements. Definitions 6. For purposes of the ISAs, the following terms have the meanings attributed below: 1. Special purpose financial statements Financial statements prepared in accordance with a special purpose framework. (Ref: Para. A4) 2. Special purpose framework 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. (Ref: Para. A1-A4) 7. Reference to financial statements in this ISA means a complete set of special purpose financial statements, including the related notes. The related notes ordinarily comprise a summary of significant accounting policies and other explanatory information. The requirements of the applicable financial reporting framework determine the form and content of the financial statements, and what constitutes a complete set of financial statements. Requirements Considerations When Accepting the Engagement Acceptability of the Financial Reporting Framework 8. ISA 210 requires the auditor to determine the acceptability of the financial reporting framework applied in the preparation of the financial statements. In an audit of special purpose financial statements, the auditor shall obtain an understanding of: (Ref: Para. A5-A8) 1. The purpose for which the financial statements are prepared; 2. The intended users; and 3. The steps taken by management to determine that the applicable financial reporting framework is acceptable in the circumstances.

Considerations When Planning and Performing the Audit 9. ISA 200 requires the auditor to comply with all ISAs relevant to the audit. In planning and performing an audit of special purpose financial statements, the auditor shall determine whether application of the ISAs requires special consideration in the circumstances of the engagement. (Ref: Para. A9-A12) 10. ISA 315 requires the auditor to obtain an understanding of the entitys 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. Forming an Opinion and Reporting Considerations 11. When forming an opinion and reporting on special purpose financial statements, the auditor shall apply the requirements in ISA 700. (Ref: Para. A13) Description of the Applicable Financial Reporting Framework 12. ISA 700 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. 13. ISA 700 deals with the form and content of the auditors report. In the case of an auditors report on special purpose financial statements: 1. The auditors 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 2. If management has a choice of financial reporting frameworks in the preparation of such financial statements, the explanation of managements responsibility for the financial statements shall also make reference to its responsibility for determining that the applicable financial reporting framework is acceptable in the circumstances. Alerting Readers that the Financial Statements Are Prepared in Accordance with a Special Purpose Framework 14. The auditors report on special purpose financial statements shall include an Emphasis of Matter paragraph alerting users of the auditors 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. The auditor shall include this paragraph under an appropriate heading. (Ref: Para. A14-A15) *** Application and Other Explanatory Material

Definition of Special Purpose Framework (Ref: Para. 6) A1. Examples of special purpose frameworks are:

A tax basis of accounting for a set of financial statements that accompany an entitys 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.

A2. There may be circumstances where a special purpose framework is based on a financial reporting framework established by an authorized or recognized standards setting organization or by law or regulation, but does not comply with all the requirements of that framework. An example is a contract that requires financial statements to be prepared in accordance with most, but not all, of the Financial Reporting Standards of Jurisdiction X. When this is acceptable in the circumstances of the engagement, it is inappropriate for the description of the applicable financial reporting framework in the special purpose financial statements to imply full compliance with the financial reporting framework established by the authorized or recognized standards setting organization or by law or regulation. In the above example of the contract, the description of the applicable financial reporting framework may refer to the financial reporting provisions of the contract, rather than make any reference to the Financial Reporting Standards of Jurisdiction X. A3. In the circumstances described in paragraph A2, the special purpose framework may not be a fair presentation framework even if the financial reporting framework on which it is based is a fair presentation framework. This is because the special purpose framework may not comply with all the requirements of the financial reporting framework established by the authorized or recognized standards setting organization or by law or regulation that are necessary to achieve fair presentation of the financial statements. A4. Financial statements prepared in accordance with a special purpose framework may be the only financial statements an entity prepares. In such circumstances, those financial statements may be used by users other than those for whom the financial reporting framework is designed. Despite the broad distribution of the financial statements in those circumstances, the financial statements are still considered to be special purpose financial statements for purposes of the ISAs. The requirements in paragraphs 13-14 are designed to avoid misunderstandings about the purpose for which the financial statements are prepared. Considerations When Accepting the Engagement Acceptability of the Financial Reporting Framework (Ref: Para. 8) A5. 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.

A6. The applicable financial reporting framework may encompass the financial reporting standards established by an organization that is authorized or recognized to promulgate standards for special purpose financial statements. In that case, those standards will be presumed acceptable for that purpose if the organization follows an established and transparent process involving deliberation and consideration of the views of relevant stakeholders. In some jurisdictions, law or regulation may prescribe the financial reporting framework to be used by management in the preparation of special purpose financial statements for a certain type of entity. For example, a regulator may establish financial reporting provisions to meet the requirements of that regulator. In the absence of indications to the contrary, such a financial reporting framework is presumed acceptable for special purpose financial statements prepared by such entity. A7. Where the financial reporting standards referred to in paragraph A6 are supplemented by legislative or regulatory requirements, ISA 210 requires the auditor to determine whether any conflicts between the financial reporting standards and the additional requirements exist, and prescribes actions to be taken by the auditor if such conflicts exist. A8. The applicable financial reporting framework may encompass the financial reporting provisions of a contract, or sources other than those described in paragraphs A6 and A7. In that case, the acceptability of the financial reporting framework in the circumstances of the engagement is determined by considering whether the framework exhibits attributes normally exhibited by acceptable financial reporting frameworks as described in Appendix 2 of ISA 210. In the case of a special purpose framework, the relative importance to a particular engagement of each of the attributes normally exhibited by acceptable financial reporting frameworks is a matter of professional judgment. For example, for purposes of establishing the value of net assets of an entity at the date of its sale, the vendor and the purchaser may have agreed that very prudent estimates of allowances for uncollectible accounts receivable are appropriate for their needs, even though such financial information is not neutral when compared with financial information prepared in accordance with a general purpose framework. Considerations When Planning and Performing the Audit (Ref: Para. 9) A9. ISA 200 requires the auditor to comply with (a) relevant ethical requirements, including those pertaining to independence, relating to financial statement audit engagements, and (b) all ISAs relevant to the audit. It also requires the auditor to comply with each requirement of an ISA unless, in the circumstances of the audit, the entire ISA is not relevant or the requirement is not relevant because it is conditional and the condition does not exist. In exceptional circumstances, the auditor may judge it necessary to depart from a relevant requirement in an ISA by performing alternative audit procedures to achieve the aim of that requirement. A10. Application of some of the requirements of the ISAs in an audit of special purpose financial statements may require special consideration by the auditor. For example, in ISA 320, judgments about matters that are material to users of the financial statements are based on a consideration of the common financial information needs of users as a group. In the case of an audit of special purpose financial statements, however, those judgments are based on a consideration of the financial information needs of the intended users.

A11. In the case of special purpose financial statements, such as those prepared in accordance with the requirements of a contract, management may agree with the intended users on a threshold below which misstatements identified during the audit will not be corrected or otherwise adjusted. The existence of such a threshold does not relieve the auditor from the requirement to determine materiality in accordance with ISA 320 for purposes of planning and performing the audit of the special purpose financial statements. A12. Communication with those charged with governance in accordance with ISAs is based on the relationship between those charged with governance and the financial statements subject to audit, in particular, whether those charged with governance are responsible for overseeing the preparation of those financial statements. In the case of special purpose financial statements, those charged with governance may not have such a responsibility; for example, when the financial information is prepared solely for managements use. In such cases, the requirements of ISA 260 may not be relevant to the audit of the special purpose financial statements, except when the auditor is also responsible for the audit of the entitys general purpose financial statements or, for example, has agreed with those charged with governance of the entity to communicate to them relevant matters identified during the audit of the special purpose financial statements. Forming an Opinion and Reporting Considerations (Ref: Para. 11) A13. The Appendix to this ISA contains illustrations of auditors reports on special purpose financial statements. Alerting Readers that the Financial Statements Are Prepared in Accordance with a Special Purpose Framework (Ref: Para. 14) A14. The special purpose financial statements may be used for purposes other than those for which they were intended. For example, a regulator may require certain entities to place the special purpose financial statements on public record. To avoid misunderstandings, the auditor alerts users of the auditors report that the financial statements are prepared in accordance with a special purpose framework and, therefore, may not be suitable for another purpose. Restriction on Distribution or Use (Ref: Para. 14) A15. In addition to the alert required by paragraph 14, the auditor may consider it appropriate to indicate that the auditors report is intended solely for the specific users. Depending on the law or regulation of the particular jurisdiction, this may be achieved by restricting the distribution or use of the auditors report. In these circumstances, the paragraph referred to in paragraph 14 may be expanded to include these other matters, and the heading modified accordingly. Appendix (Ref: Para. A13) Illustrations of Auditors Reports on Special Purpose Financial Statements

Illustration 1: An auditors report on a complete set of financial statements prepared in accordance with the financial reporting provisions of a contract (for purposes of this illustration, a compliance framework). Illustration 2: An auditors report on a complete set of financial statements prepared in accordance with the tax basis of accounting in Jurisdiction X (for purposes of this illustration, a compliance framework). Illustration 3: An auditors report on a complete set of financial statements prepared in accordance with the financial reporting provisions established by a regulator (for purposes of this illustration, a fair presentation framework).

Illustration 1: Circumstances include the following:

The financial statements have been prepared by management of the entity in accordance with th financial reporting provisions of a contract (i.e., a special purpose framework) to comply with th provisions of that contract. Management does not have a choice of financial reporting frameworks. The applicable financial reporting framework is a compliance framework. The terms of the audit engagement reflect the description of managements responsibility for th financial statements in ISA 210. Distribution and use of the auditors report are restricted.

INDEPENDENT AUDITORS REPORT [Appropriate Addressee] We have audited the accompanying financial statements of ABC Company, which comprise the balance sheet as at December 31, 20X1, and the income statement, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. The financial statements have been prepared by management of ABC Company based on the financial reporting provisions of Section Z of the contract dated January 1, 20X1 between ABC Company and DEF Company (the contract). Managements Responsibility for the Financial Statements Management is responsible for the preparation of these financial statements in accordance with the financial reporting provisions of Section Z of the contract, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. 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.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements of ABC Company for the year ended December 31, 20X1 are prepared, in all material respects, in accordance with the financial reporting provisions of Section Z of the contract. Basis of Accounting and Restriction on Distribution and Use Without modifying our opinion, we draw attention to Note X to the financial statements, which describes the basis of accounting. The financial statements are prepared to assist ABC Company to comply with the financial reporting provisions of the contract referred to above. As a result, the financial statements may not be suitable for another purpose. 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. [Auditors signature] [Date of the auditors report] [Auditors address] Illustration 2: Circumstances include the following:

The financial statements have been prepared by management of a partnership in accordance wi the tax basis of accounting in Jurisdiction X (i.e., a special purpose framework) to assist the partners in preparing their individual income tax returns. Management does not have a choice o financial reporting frameworks. The applicable financial reporting framework is a compliance framework. The terms of the audit engagement reflect the description of managements responsibility for th financial statements in ISA 210. Distribution of the auditors report is restricted.

INDEPENDENT AUDITORS REPORT

[Appropriate Addressee] We have audited the accompanying financial statements of ABC Partnership, which comprise the balance sheet as at December 31, 20X1 and the income statement for the year then ended, and a summary of significant accounting policies and other explanatory information. The financial statements have been prepared by management using the tax basis of accounting in Jurisdiction X. Managements 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, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. 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. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the partnerships preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the partnerships internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements of ABC Partnership for the year ended December 31, 20X1 are prepared, in all material respects, in accordance with [describe the applicable income tax law] of Jurisdiction X. Basis of Accounting and Restriction on Distribution Without modifying our opinion, we draw attention to Note X to the financial statements, which describes the basis of accounting. The financial statements are prepared to assist the partners of ABC Partnership in preparing their individual income tax returns. As a result, the financial statements may not be suitable for another purpose. Our report is intended solely for

ABC Partnership and its partners and should not be distributed to parties other than ABC Partnership or its partners. [Auditors signature] [Date of the auditors report] [Auditors address] Illustration 3: Circumstances include the following:

The financial statements have been prepared by management of the entity in accordance with th financial reporting provisions established by a regulator (i.e., a special purpose framework) to meet the requirements of that regulator. Management does not have a choice of financial reporting frameworks. The applicable financial reporting framework is a fair presentation framework. The terms of the audit engagement reflect the description of managements responsibility for th financial statements in ISA 210. Distribution or use of the auditors report is not restricted. The Other Matter paragraph refers to the fact that the auditor has also issued an auditors repo on financial statements prepared by ABC Company for the same period in accordance with a general purpose framework.

INDEPENDENT AUDITORS REPORT [Appropriate Addressee] We have audited the accompanying financial statements of ABC Company, which comprise the balance sheet as at December 31, 20X1, and the income statement, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. The financial statements have been prepared by management based on the financial reporting provisions of Section Y of Regulation Z. Managements Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the financial reporting provisions of Section Y of Regulation Z, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. 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. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, (or give a true and fair view of) the financial position of ABC Company as at December 31, 20X1, and (of) its financial performance and its cash flows for the year then ended in accordance with the financial reporting provisions of Section Y of Regulation Z. Basis of Accounting Without modifying our opinion, we draw attention to Note X to the financial statements, which describes the basis of accounting. The financial statements are prepared to assist ABC Company to meet the requirements of Regulator DEF. As a result, the financial statements may not be suitable for another purpose. Other Matter ABC Company has prepared a separate set of financial statements for the year ended December 31, 20X1 in accordance with International Financial Reporting Standards on which we issued a separate auditors report to the shareholders of ABC Company dated March 31, 20X2. [Auditors signature] [Date of the auditors report] [Auditors address]