At its meeting in February, the International Auditing

and Assurance Standards Board (IAASB) agreed to advise

auditors that reports for special purpose audit engagements

can, with appropriate amendments, be issued in the form

of the illustrative report in paragraph 60 of International

Standard on Auditing (ISA) 700, The Independent Auditor’s

Report on a Complete Set of General Purpose Financial

Statements.

To enhance the transparency and comparability of auditors’

reports across international borders, the IAASB conducted

a comprehensive revision of ISA 700 and issued a revised

standard in December 2004. The revised standard, which is

effective for auditors’ reports dated on or after December

31, 2006, establishes a new form of report.

The IAASB also revised extant ISA 800, The Independent

Auditor’s Report on Special Purpose Audit Engagements.

This revision included amending the requirements for

the auditor’s report, in order to be consistent with revised

ISA 700. The IAASB approved ISA 800 (Revised), Special

Considerations—Audits of Special Purpose Financial State-

ments and Specific Elements, Accounts or Items of a Financial

Statement in October 2006; however, the revised standard

is currently being redrafted in the IAASB’s clarity style,

and will not become effective at a date earlier than

December 15, 2008.

Consequently, during the period until revised ISA 800

is issued and becomes effective, auditors following the

guidance and illustrative reports in the respective ISAs

will issue different forms of report as a result of an audit,

depending on whether the financial statements are general

purpose or special purpose.

The IAASB has been asked whether, pending the release

of revised ISA 800, it is permissible to issue an auditor’s

report for a special purpose audit engagement in the form

of the illustrative report in revised ISA 700. Extant ISA 800

remains in force and it is necessary for auditors to comply

with it. The IAASB is, however, of the view that auditors’

reports for special purpose audit engagements drafted in

the form of the illustrative report in revised ISA 700 could

comply with the requirements of extant ISA 800.

It is important to note that revised ISA 700 deals with

an auditor’s report on a complete set of general purpose

financial statements prepared in accordance with a fair

presentation framework.1 Extant ISA 800, however, deals

with an auditor’s report on:

• A complete set of financial statements prepared in

accordance with an other comprehensive basis of

accounting;

• A component of a complete set of general purpose

or special purpose financial statements, such as

a single financial statements, specified accounts,

elements of accounts, or items in a financial

statement; and

• Compliance with contractual agreements.

The illustrative report in revised ISA 700 therefore has to

be tailored to reflect the circumstances of the particular spe-

cial purpose audit engagement. For example, if the

applicable financial reporting framework is a compliance

framework, the description of management’s responsibili-

ties for the financial statements does not refer to “the prepa-

ration and fair presentation” of the financial statements.

AUDITORS’ REPORTS ON SPECIAL PURPOSE AUDIT ENGAGEMENTS

INTERNATIONAL AUDITING AND ASSURANCE STANDARDS BOARDI A A S BAPRIL 2007/02

The IAASB is an independent standard-setting board of the International Federation of Accountants.

1 Some financial reporting frameworks acknowledge explicitly or implicitly that, to achieve fair presentation of the financial statements, it may be necessary

for management to provide disclosures beyond the specific requirements of the framework; or acknowledge explicitly that, in extremely rare circumstances,

it may be necessary for management to depart from a specific requirement of the framework to achieve fair presentation of the financial statements. For

purposes of the ISAs, such frameworks are referred to as “fair presentation frameworks.” Financial reporting frameworks that encompass primarily the

financial reporting standards established by an organization that is authorized or recognized to promulgate standards to be used by entities for preparing

and presenting general purpose financial statements are often designed to achieve fair presentation, for example, International Financial Reporting Standards

(IFRSs). Other financial reporting frameworks only require compliance with the specific requirements of the framework. For purposes of the ISAs, such

frameworks are referred to as “compliance frameworks.”

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The word “fair” is omitted. The description refers to the

applicable financial reporting framework or a note in the

financial statements that describes the framework. Further,

in the case of a compliance framework, the auditor’s opin-

ion does not contain the phrases “give a true and fair view

of” or “present fairly, in all material respects.”

ISA 800 (Revised), which is currently being redrafted,

contains illustrations of auditors’ reports for special purpose

audit engagements. Although not yet effective, auditors may

find these illustrations helpful when they decide to issue ex-

tant ISA 800 auditors’ reports in the form of the illustrative

report in ISA 700. These illustrations can be found at http://

www.ifac.org/IAASB/Meeting-FileDL.php?FID=2692.

About the IAASB

The objective of the IAASB, an independent standard-

setting board within the International Federation of

Accountants, is to serve the public interest by setting high

quality auditing and assurance standards and by facilitating

the convergence of international and national standards,

thereby enhancing the quality and uniformity of practice

throughout the world and strengthening public confidence

in the global auditing and assurance profession. The Public

Interest Oversight Board oversees the activities of the IAASB

and, as one element of that oversight, establishes the criteria

for its due process and working procedures.

Key Contacts

John Kellas, Chairman

(johnkellas@ifac.org)

Jim Sylph, Executive Director, Professional Standards

(jimsylph@ifac.org)

Alta Prinsloo, IAASB Deputy Director

(altaprinsloo@ifac.org)

INTERNATIONAL AUDITING AND ASSURANCE STANDARDS BOARD

545 Fifth Avenue, 14th Floor, New York, NY 10017 USATel +1 (212) 286-9344 Fax +1 (212) 286-9570 www.ifac.org email: pr@ifac.org

International Federation of AccountantsINTERNATIONAL AUDITING AND ASSURANCE STANDARDS BOARD

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