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7/29/2019 Audit Reports - Alert to Restrict Report
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Alert to Restrict Report
I. Relevant AICPA Guidance
The relevant AICPA guidance is provided by AU 905: "Alert That Restricts the Use of the Auditor's Written
Communication." The standard states that the auditor's objective is to restrict the use of the auditor's
written communication by including an alert when the potential exists for that communication to be
misunderstood if taken out of the context of its intended use.
II. Using an Alert to Restrict the Use of the Auditor's Report
A. Such an alert should be included as a separate paragraph of the report when:
1. The subject matter is based on criteria that are only suitable for (or available to) a limited
number of users; or
2. The matters are presented in a by-product report that is not the primary objective of the
engagement.
B. Including an alert -- The auditor is not prohibited from including such an alert in any oth erauditor's report or written communication.
C. Purpose of the alert -- The purpose of the alert is to restrict the use of the auditor's written
communication because of the potential for misunderstanding if taken out of the context for
which the written communication is intended.
D. Content of the alert -- The auditor should state that the written commu nication is intended
solely for the use of the specified parties (and either identify or refer to those parties). .
E. Adding other specified parties -- The auditor should obtain acknowledgment in writing from
such other parties as to their understanding of the nature of the engagement, the criteria used,
and the auditor's written communication. They can be added after the release of the auditor's
written communication (by amending the written communication to add them, but without
changing the original date of the auditor's written communication).
F. Distribution of the auditor's written communication -- The auditor is not responsible for
enforcing the distribution of the auditor's written communication after its release. The purpose of
the alert is to appropriately communicate such restricted distribution.
III. Sample Reporting Language for an Alert to Restrict the Use of the Auditor's Report
A. A typical alert consists of one sentence at the end of the auditor's report:
This (report, letter, presentation, or communication) is intended solely for the informationand use of (list or refer to the specified parties) and is not intended to be and should not
be used by anyone other than these specified parties.
B. Alert for engagements performed in accordance with Government Auditing Standards:
The purpose of this (report, letter, presentation, or communication) is solely to (describe
the purpose of the auditor's written communication, such as to describe the scope of our
testing of internal control over financial reporting and compliance, and the results of that
testing, and not to provide an opinion on the effectiveness of the entity's internal control
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over financial reporting or on compliance). This (report, letter, presentation, or
communication) is an integral part of an audit performed in accordance with Government
Auditing Standards in considering (describe the results that are being assessed, such as
the entity's internal control over financial reporting and compliance). Accordingly, this
(report, letter, presentation, or communication) is not suitable for any other purpose.
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FlashcardsFlashcard #1 (FC7335)
Identify 2 general circumstances that would require
an alert to restrict the use of the auditor's report.
1. When th e subject matter is based on criteria
that are only suitable for (or available to) a
limited number of users; or
2. The matters are presented in a by-product
report that is not the primary objective of the
engagement.
Flashcard #2 (FC7336)
What is the purpose of an alert to restrict the use of
the auditor's written communication?
The purpose is to restrict the use of the auditor's
written communication due to potential for
misunderstanding if taken out of the context for
which the written communication is intended.
Flashcard #3 (FC7337)
Give an example of the language typically used to
restrict the distribution of the auditor's report or other
written communication.
This (report, letter, presentation, or communication) is
intended solely for the information and use of (list or
refer to the specified parties) and is not intended to be
and should not be used by anyone other than thesespecified parties.
Flashcard #4 (FC7338)
What is the auditor's responsibility to enforce the
distribution of the auditor's written communication
having an alert to restrict the use of it?
The auditor is not responsible for enforcing such
distribution. The purpose of the alert is to
appropriately communication the restricted
distribution.
