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Explanatory Statement - ASA 800

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Explanatory Statement - ASA 800

     (April 2006)

Explanatory Statement

ASA 800 The Auditor’s

    Report on Special

    Purpose Audit

    Engagements

    Issued by the Auditing and Assurance Standards Board

    Explanatory Statement Auditing Standard ASA 800 The Auditor’s Report on Special Purpose Audit Engagements

    Explanatory Statement

    Reasons for Issuing ASA 800 The Auditor’s Report on Special Purpose Audit Engagements

    The Auditing and Assurance Standards Board (AUASB) issues

    Auditing Standard ASA 800 The Auditor’s Report on Special

    Purpose Audit Engagements due to the requirements of the

    legislative provisions explained below.

    The Corporate Law Economic Reform Program (Audit Reform

    and Corporate Disclosure) Act 2004 established the AUASB as an independent statutory body under section 227A of the

    Australian Securities and Investments Commission Act 2001, as

    from 1 July 2004. Under section 336 of the Corporations Act 2001, the AUASB may make Auditing Standards for the

    purposes of the corporations legislation. These Auditing

    Standards are legislative instruments under the Legislative Instruments Act 2003.

    Process of making Auditing Standards

    Section 1455 of the Corporations Act 2001 and Corporations Regulation 10.5.01 gave interim legal endorsement from 1 July 2004

    to the majority of Auditing Standards made by the former Auditing &

    Assurance Standards Board of the Australian Accounting Research

    Foundation. The AUASB has reviewed the Auditing Standards and

    has proceeded to make them as legally enforceable Auditing

    Standards under the Corporations Act 2001. The Auditing Standards have been made also in accordance with the

    Financial Reporting Council’s Strategic Direction to the AUASB

    dated 6 April 2005, pursuant to section 225 of the ASIC Act.

    The Strategic Direction, inter alia, provides that the AUASB develops

    Auditing Standards that:

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Explanatory Statement Auditing Standard ASA 800 The Auditor’s

    Report on Special Purpose Audit Engagements

    ? have a clear public interest focus and are of the highest

    quality;

    ? use the International Standards on Auditing (ISAs) of the

    International Auditing and Assurance Standards Board

    (IAASB) as a base;

    ? conform with the Australian regulatory environment; and ? are capable of enforcement.

    In implementing the Strategic Direction, the AUASB has

    undertaken a process of thorough review and revision that has:

    ? addressed the enforceability of mandatory requirements; ? clarified auditors’ obligations under the Auditing

    Standards;

    ? provided for sector neutrality in the Auditing Standards;

    and

    ? included other amendments as necessary.

    Purpose of Auditing Standard ASA 800 The

    Auditor’s Report on Special Purpose Audit

    Engagements The purpose of Auditing Standard ASA 800 is to establish

    mandatory requirements and to provide explanatory guidance in

    connection with special purpose audit engagements including:

    (a) a financial report prepared in accordance with an alternative

    comprehensive basis of accounting, such as a special purpose

    financial report prepared for the purpose of fulfilling the

    directors’ financial reporting requirements of the

    Corporations Act 2001;

    (b) a component of a general purpose or special purpose financial

    report, such as a single financial statement, specified accounts,

    elements of accounts, or items in a financial statement;

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Explanatory Statement Auditing Standard ASA 800 The Auditor’s

    Report on Special Purpose Audit Engagements

    (c) compliance with contractual agreements; and

    (d) a summarised financial report.

    Auditing Standard ASA 800 is to be read in conjunction with the

    Preamble to AUASB Standards, which sets out the intentions of the AUASB on how the Auditing Standards are to be understood,

    interpreted and applied.

    Operative Date

    This Auditing Standard is operative for financial reporting

    periods commencing on or after 1 July 2006.

    Main changes from Auditing Standard AUS 802

    (May 2002) The Audit Report on Financial

    Information Other Than a General Purpose

    Financial Report

    The main differences between ASA 800 and AUS 802 are that in

    ASA 800:

    1. The word ‘shall’, in the bold-type paragraphs, is the

    terminology used to describe an auditor’s mandatory

    requirements, whereas an auditor’s degree of responsibility is

    described in AUS 802 by the word ‘should’.

    2. The explanatory paragraphs provide guidance and illustrative

    examples to assist the auditor in fulfilling the mandatory

    requirements, whereas in AUS 802 some obligations are

    implied within certain explanatory paragraphs. Accordingly,

    such paragraphs have been redrafted to clarify that they form

    part of the explanatory guidance.

    3. The basic elements required in the auditor’s report on a

    special purpose audit engagement, except for a report on a

    summarised financial report, have been updated based on the

    basic elements prescribed in ASA 700 The Auditor’s Report

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    Explanatory Statement Auditing Standard ASA 800 The Auditor’s

    Report on Special Purpose Audit Engagements

    on a General Purpose Financial Report. Consequently, the

    example auditors’ reports in Appendix 1 have also been

    updated. The basic elements required in the auditor’s report on a summarised financial report have been updated based on the

    basic elements prescribed in ISA 800 The Independent

    Auditor’s Report on a Special Purpose Audit Engagement, but

    also contain some basic elements prescribed in ASA 700.

    4. The following additional mandatory requirements are

    included (these mandatory requirements are either not

    contained in AUS 802 or have been expanded in this Auditing

    Standard):

     General Considerations

    (a) When requested to report in a prescribed format, the

    auditor shall consider the substance and wording of

    the prescribed format and, when necessary, shall

    make appropriate changes to conform to the

    requirements of this Auditing Standard, either by

    rewording the form or by attaching a separate report

    (paragraph 13). In AUS 802, when requested to report

    on financial information in a prescribed format, the

    auditor should consider whether there are any

    restrictions on the substance and wording of the report

    that would constitute a limitation on the scope of the

    audit that could not be overcome either be rewording

    the prescribed format or by attaching a separate report.

    (b) The auditor shall consider whether any significant

    interpretations of an agreement on which the financial

    information is based are clearly disclosed in the

    financial information (paragraph 15). In AUS 802,

    when the information on which the auditor has been

    engaged to express an opinion is based on provisions

    of an agreement, the auditor should consider whether

    any significant interpretations of the agreement have

    been made in preparing the information.

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    Explanatory Statement Auditing Standard ASA 800 The Auditor’s

    Report on Special Purpose Audit Engagements

    Reports on Financial Reports Prepared in Accordance with

    an Alternative Comprehensive Basis of Accounting

    (c) The auditor’s report on a financial report prepared in

    accordance with an alternative comprehensive basis of

    accounting shall include a statement that indicates the

    basis of accounting used or shall refer to the note to

    the financial report giving that information. The

    opinion shall state whether the financial report gives a

    true and fair view or presents fairly, in all material

    respects, in accordance with the identified basis of

    accounting (paragraph 22).

    (d) If the financial report prepared on an alternative

    comprehensive basis of accounting is not suitably

    titled or the basis of accounting is not adequately

    disclosed, the auditor shall issue an appropriately

    modified report (paragraph 25).

    Reports on Components of a Financial Report

    (e) In determining the scope of the engagement, the

    auditor shall consider those financial report items that

    are inter-related and which could materially affect the

    information on which the audit opinion is to be

    expressed (paragraph 28). In AUS 802, when deciding

    whether to accept a separate engagement to express an

    audit opinion on a component(s) of a financial report,

    the auditor should consider whether the scope of the

    proposed engagement is sufficient to allow adequate

    attention to be paid to the inter-relationship that exists

    between various components.

    (f) The auditor shall consider the concept of materiality

    in relation to the component of a financial report

    being reported upon (paragraph 30). In AUS 802, the

    auditor should consider the concept of materiality in

    relation to ‘other’ financial information.

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    Explanatory Statement Auditing Standard ASA 800 The Auditor’s

    Report on Special Purpose Audit Engagements

    (g) The auditor’s report on a component of a financial

    report shall include a statement that indicates the

    applicable financial reporting framework in

    accordance with which the component is presented or

    refers to an agreement that specifies the basis of

    accounting used. The opinion shall state whether the

    component gives a true and fair view or presents fairly,

    in all material respects, in accordance with the

    applicable financial reporting framework or identified

    basis of accounting (paragraph 32). Reports on Compliance with Contractual Agreements

    (h) Engagements to express an opinion as to an entity’s

    compliance with contractual agreements shall be

    undertaken only when the overall aspects of

    compliance relate to accounting and financial matters

    within the scope of the auditor’s professional

    competence (paragraph 39).

    (i) The report shall state whether, in the auditor’s opinion,

    the entity has complied with the particular provisions

    of the agreement (paragraph 41).

    5. The mandatory requirements contained in

    paragraphs .09, .10, .17, .30 and .34 of AUS 802 are not

    included in this Auditing Standard. These mandatory

    requirements have been superseded by new mandatory

    requirements of this Auditing Standard or other Auditing

    Standards.

    6. The matters dealt with in Appendix 2, Summary of Audit

    Reporting Requirements Under the Corporations Act 2001

    have been updated.

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Explanatory Statement Auditing Standard ASA 800 The Auditor’s

    Report on Special Purpose Audit Engagements

    Consultation prior to issuing this Auditing

    Standard

    The AUASB has consulted publicly as part of its due process in

    developing this Auditing Standard. Exposure Draft ED 35/05

    Proposed Auditing Standard: The Audit Report on Financial

    Information Other than a General Purpose Financial Report (Re-

    issuance of AUS 802) was issued on 16 December 2005 with a 45 day comment period. Submissions were received by the AUASB

    and it has considered these submissions as part of the

    development and finalisation of this Auditing Standard.

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