Document ID: chunk:federal_register_of_legislation:F2023C00337:reg:1:p7
Version: federal_register_of_legislation:F2023C00337
Segment Type: reg
Provision Reference: reg 1 (pt 7/23)
Character Range: 26713–29810

In many cases, the auditor may presume that the applicable financial reporting framework is acceptable, as described in paragraphs A8‑A9.

Determining the Acceptability of the Financial Reporting Framework

A4.             Factors that are relevant to the auditor's determination of the acceptability of the financial reporting framework to be applied in the preparation of the financial report include:

           * The nature of the entity (for example, whether it is a business enterprise, a public sector entity or a not‑for‑profit organisation);

           * The purpose of the financial report (for example, whether it is prepared to meet the common financial information needs of a wide range of users or the financial information needs of specific users);

           * The nature of the financial statements (for example, whether the financial statements are a complete set of financial statements or a single financial statement); and

           * Whether law or regulation prescribes the applicable financial reporting framework.

A5.             Many users of financial reports are not in a position to demand financial reports tailored to meet their specific information needs.  While all the information needs of specific users cannot be met, there are financial information needs that are common to a wide range of users.  Financial reports prepared in accordance with a financial reporting framework designed to meet the common financial information needs of a wide range of users are referred to as general purpose financial reports.

A6.             In some cases, the financial report will be prepared in accordance with a financial reporting framework designed to meet the financial information needs of specific users.  Such financial reports are referred to as special purpose financial reports.  The financial information needs of the intended users will determine the applicable financial reporting framework in these circumstances.  ASA 800 discusses the acceptability of financial reporting frameworks designed to meet the financial information needs of specific users.[10]

A7.             Deficiencies in the applicable financial reporting framework that indicate that the framework is not acceptable may be encountered after the audit engagement has been accepted.  When use of that framework is prescribed by law or regulation, the requirements of paragraphs 19‑20 apply.  When use of that framework is not prescribed by law or regulation, management may decide to adopt another framework that is acceptable.  When management does so, as required by paragraph 16, new terms of the audit engagement are agreed to reflect the change in the framework as the previously agreed terms will no longer be accurate.

General purpose frameworks

A8.             At present, there is no objective and authoritative basis that has been generally recognised globally for judging the acceptability of general purpose frameworks.  In the absence of such a basis, financial reporting standards established by organisations that are authorised or recognised to promulgate standards