Special purpose financial statements are financial reports that are intended for presentation to a limited group of users. Such financial statements are prepared under certain specific circumstances where an entity would be required to submit financial statements as per the special purpose framework or an audited single financial statement, specific elements, accounts, or items of a financial statement to a specific category of stakeholders. The audits of such statements are conducted in accordance with all the Standards on Auditing (SAs). The Institute of Chartered Accountants of India (ICAI) has formulated special consideration standards which are also required to be followed by an auditor when undertaking such engagements. In this edition of Accounting and Auditing Update (AAU), we aim to summarise the key considerations for financial statements to be prepared under a special purpose framework for a specific set of users.
The concept of materiality is an important consideration for financial reporting and auditing. The term ‘materiality threshold’ in the context of audits refers to the benchmark used to obtain reasonable assurance on the financial statements. The concept of materiality is fundamental to an audit and is a key judgement area for an auditor. An auditor considers the needs of the users of an entity’s financial statements when determining the appropriate benchmark, additionally they should also consider nature of the entity and the industry in which it operates as a factor on which to base their materiality calculations. The article on this topic discusses the key concepts relating to materiality, how it is determined and how does it impact the audit of the financial statements
This publication also casts its lens on the Non-Compliance with Laws and Regulations (NOCLAR) enunciated in ICAI’s Code of Ethics on professional accountants. The Code of Ethics (Code of Ethics, 2019) introduced requirements relating to NOCLAR which sets out a framework that requires professional accountants to take actions when they become aware of any illegal or potential illegal acts. The Code defines that NOCLAR comprises acts of omission or commission, intentional or unintentional, which are contrary to the prevailing laws or regulations. The NOCLAR requirements are applicable with effect from 1 October 2022. Our article on this topic summarises the key requirements of NOCLAR, obligations relating to compliance and the impact on professional accountants in practice and those in service.
As is the case each month, we have also included a regular round-up of some recent regulatory updates.
We would be delighted to receive feedback/suggestions from you on the topics we should cover in the forthcoming editions of AAU.
