Special purpose frameworks are financial reporting frameworks other than GAAP, commonly used by nonissuers, including:
Cash Basis: Records cash transactions and modifications like depreciation.
Tax Basis: Used for tax return preparation.
Regulatory Basis: Meets specific regulatory requirements.
Contractual Basis: Fulfills contractual agreements.
Other Basis: Applies logical, reasonable criteria.
Understand the purpose, users, and management's acceptance of the framework.
Ensure management includes disclosures such as:
Framework description.
Differences from GAAP.
Significant interpretations.
Additional disclosures for fair presentation.
Title indicating independence.
Addressee.
Opinion identifying the framework.
Description of the purpose (if required).
Management's responsibilities for the framework.
Reference to ethical compliance.
Emphasis-of-matter paragraph indicating:
Framework use.
Suitability for the intended purpose (if required).
Other-matter paragraph restricting use (if applicable).
Signature, city/state, and report date.
Non-GAAP titles, such as "Statement of Assets and Liabilities – Cash Basis."
Emphasis on framework-specific disclosures.
No emphasis-of-matter or other-matter paragraph.
Opinion on both GAAP and the special purpose framework.
Auditors may report on financial statements prepared under frameworks accepted in another country if:
Framework serves the financial statements' purpose.
Users are clearly identified.
Management confirms framework acceptability.
Follow U.S. GAAS and adapt as necessary for the country-specific framework.
When applying international standards (e.g., ISAs), auditors must comply with both those and U.S. GAAS, except for reporting form/content.
Outside the U.S.: Use the other country’s report format or ISAs, ensuring compliance with their standards.
Inside the U.S.: Use a U.S. form report with an emphasis-of-matter paragraph to highlight framework differences from U.S. GAAP.
Provides advice or reports on applying a financial reporting framework to specific transactions. The reporting accountant:
May not advise on hypothetical transactions.
Does not need to be independent.
Understand transaction details and applicable framework requirements.
Consult with the continuing accountant, if possible.
Document all relevant facts and conclusions.
Description of the engagement.
Entity and transaction details.
Analysis of framework application.
Use restriction for specific parties.
Statement on the accountant's independence, if applicable.
An auditor's report on financial statements prepared on the cash receipts and disbursements basis of accounting should include all of the following, except: