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In-Depth Study Complete
HKSA 805 - Special Considerations - Single Financial Statements (Condensed)
๐ PDF โ HKICPA Handbook Vol III
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| Section | Key Concept | Brief Description |
|---|---|---|
| Scope & Definitions | Applies to audits of single financial statements or specific elements, accounts, or items of a financial statement. | Deals with special considerations in applying HKSAs to such audits, excluding component auditor reports under HKSA 600. |
| Acceptance of Engagement | Determine practicability and acceptability of the financial reporting framework. | If not auditing the complete set, assess if audit is practicable. Ensure framework provides adequate disclosures. Consider form of opinion. |
| Planning & Performance | Adapt all relevant HKSAs as necessary. | HKSAs on fraud, related parties, and going concern are relevant. Materiality may be lower than for a complete set. Consider interrelationship of items. |
| Forming an Opinion & Reporting | Apply HKSA 700 and 800 as adapted. Express separate opinions when auditing both complete set and single statement/element. | Ensure differentiation when published together. Consider implications of matters in the complete set audit report. |
| Adverse/Disclaimer on Complete Set | Cannot include unmodified opinion on a single financial statement in the same report. | Exception for specific elements if not prohibited, not published together, and not a major portion. Single financial statement is always a major portion. |
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Scope and Definitions
Scope of HKSA 805
HKSA 805 deals with special considerations in applying HKSAs to audits of:
- A single financial statement (e.g., balance sheet only, income statement only)
- A specific element, account, or item of a financial statement (e.g., accounts receivable, inventory, a schedule of profit participation)
Important Distinctions:
- Relationship with Other HKSAs: HKSAs 100-700 apply and must be adapted as necessary.
- Applicable Frameworks: May be general purpose or special purpose (HKSA 800 also applies).
- Exclusions: Does NOT apply to component auditor reports under HKSA 600. Does NOT override other HKSAs.
Definitions
| Term | Definition |
|---|---|
| Element of a financial statement | An element, account or item of a financial statement. |
| Single financial statement or specific element | Includes the related disclosures (explanatory or other descriptive information). |
Effective Date
| Type of Audit | Effective Date |
|---|---|
| Audits for periods ending on or after | 15 December 2016 |
| Audits as at a specific date on or after | 15 December 2016 |
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Acceptance of the Engagement
Application of HKSAs (Paragraph 7)
Critical Rule: The requirement to comply with all relevant HKSAs applies irrespective of whether the auditor is also engaged to audit the entity's complete set of financial statements.
Key Consideration: If the auditor is NOT also engaged to audit the complete set, the auditor shall determine whether the audit is practicable.
Practical Implications (A5-A6):
- The auditor often does NOT have the same understanding of the entity and its internal control.
- The auditor does NOT have audit evidence about the general quality of accounting records.
- The auditor may need further evidence to corroborate audit evidence.
- Certain HKSAs may require disproportionate work (e.g., HKSA 570 for a schedule of accounts receivable).
Acceptability of the Financial Reporting Framework (Paragraph 8)
Critical Rule: The auditor must determine whether the framework will result in a presentation that provides adequate disclosures to enable intended users to understand the information conveyed and the effect of material transactions and events.
Form of Opinion (Paragraph 9)
| Framework Type | Unmodified Opinion Phrasing |
|---|---|
| Fair presentation framework | "presents fairly, in all material respects" OR "gives a true and fair view" |
| Compliance framework | "prepared, in all material respects, in accordance with [the applicable financial reporting framework]" |
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Planning and Performing the Audit
Adaptation of HKSAs (Paragraph 10)
Critical Rule: The auditor shall adapt all HKSAs relevant to the audit as necessary in the circumstances of the engagement.
Key Adaptation Considerations (A10-A15)
| Consideration | Description |
|---|---|
| Relevance of HKSAs | Even for specific elements, HKSA 240 (Fraud), HKSA 550 (Related Parties), and HKSA 570 (Going Concern) are, in principle, relevant. |
| Communication with Governance | Those responsible for oversight of the single financial statement may NOT be the same as those for the complete set. |
| Written Representations | Replace representations about the complete set with representations about the financial statement/element. |
| Use of Audit Evidence | May use evidence from the complete set audit, but must obtain sufficient appropriate audit evidence for the single statement/element opinion. |
| Interrelationship of Items | The auditor may NOT be able to consider the financial statement or element in isolation. |
| Materiality | Materiality may be LOWER than for the complete set, affecting the nature, timing, and extent of procedures. |
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Forming an Opinion and Reporting - General
General Requirements (Paragraph 11)
Critical Rule: Apply the requirements in HKSA 700 (Revised) and HKSA 800 (Revised) as adapted.
Key Evaluation (A16): Evaluate whether the financial statement or element provides adequate disclosures for intended users.
Going Concern Considerations (A19)
The description of management's and auditor's responsibilities may need to be adapted depending on how HKSA 570 applies.
Key Audit Matters (A20)
| Scenario | Application of HKSA 701 |
|---|---|
| Audits of complete sets of general purpose financial statements of listed entities | Required |
| Audits of a single financial statement or specific element | Only when required by law/regulation or auditor decides to communicate KAMs |
| When KAMs are communicated | HKSA 701 applies in its entirety |
Separate Opinions and Differentiation (Paragraphs 12-13)
Critical Rule: If auditing both the complete set and a single statement/element, express a SEPARATE OPINION for each engagement.
If published together and not sufficiently differentiated, the auditor shall ask management to rectify, differentiate the opinions, and NOT issue the report until satisfied.
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Considering Implications from the Complete Set Audit
Implications of Matters in the Complete Set Audit Report (Paragraph 14)
Critical Rule: If the auditor's report on the complete set includes any of the following, consider the implications for the audit of the single financial statement/element:
| Matter | Source |
|---|---|
| Modified opinion | HKSA 705 |
| Emphasis of Matter or Other Matter paragraph | HKSA 706 |
| Material Uncertainty Related to Going Concern | HKSA 570 |
| Key audit matters | HKSA 701 |
| Statement describing uncorrected material misstatement of other information | HKSA 720 |
Adverse Opinion or Disclaimer on Complete Set (Paragraphs 15-17)
Critical Rule: If an adverse opinion or disclaimer is expressed on the complete set, the auditor cannot include an unmodified opinion on a single financial statement in the same report.
Exception for Specific Elements (Paragraph 16): The auditor may express an unmodified opinion on a specific element ONLY if ALL of the following conditions are met:
| Condition | Description |
|---|---|
| (a) | Not prohibited by law or regulation |
| (b) | Opinion is in a report NOT published together with the adverse/disclaimer report |
| (c) | The element does NOT constitute a major portion of the complete set |
Absolute Prohibition for Single Financial Statements (Paragraph 17): The auditor shall NOT express an unmodified opinion on a single financial statement if an adverse opinion or disclaimer was expressed on the complete set, even if the reports are not published together. A single financial statement is deemed a major portion.
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Application and Other Explanatory Material (A1-A4, Appendices)
Application and Other Explanatory Material
Scope Details (A1-A4)
| Term | Definition |
|---|---|
| Historical Financial Information | Information expressed in financial terms, derived primarily from the accounting system, about past economic events or conditions. |
| Financial Statements | A structured representation of historical financial information, including disclosures, intended to communicate economic resources or obligations. |
HKSAs are written for audits of financial statements and must be adapted for other historical financial information. Reasonable assurance engagements other than audits are performed under HKSAE 3000.
Appendix 1 - Examples of Specific Elements
| Category | Examples |
|---|---|
| Balance sheet items | Accounts receivable, allowance for doubtful accounts, inventory, liability for accrued benefits, recorded value of intangible assets, liability for incurred but not reported claims |
| Schedules | Schedule of externally managed assets and income, schedule of net tangible assets, schedule of disbursements, schedule of profit participation or employee bonuses |
Appendix 2 - Illustrations of Auditor's Reports
| Illustration | Subject | Entity Type | Framework | Opinion Type |
|---|---|---|---|---|
| 1 | Balance sheet | Non-listed | General purpose (fair presentation) | Unmodified with going concern emphasis |
| 2 | Statement of cash receipts and disbursements | Non-listed | Special purpose (fair presentation) | Unmodified with basis of accounting emphasis |
| 3 | Accounts receivable schedule | Listed | Special purpose (compliance) | Unmodified with basis of accounting and restriction on distribution |
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Key Takeaways Summary
Key Takeaways Summary
| Area | Key Point |
|---|---|
| Scope | Applies to audits of single financial statements OR specific elements, accounts or items of a financial statement. |
| Exclusions | Does NOT apply to component auditor reports under HKSA 600; does NOT override other HKSAs. |
| Acceptance | Must determine practicability if not also auditing complete set; must assess acceptability of financial reporting framework; must consider appropriateness of expected form of opinion. |
| Planning & Performance | Must adapt ALL relevant HKSAs as necessary; materiality may be LOWER than for complete set; interrelated items may require additional procedures. |
| Separate Opinions | Must express separate opinion for each engagement when auditing both complete set and single financial statement/element. |
| Differentiation | Must ensure sufficient differentiation when published together; must not issue report until satisfied. |
| Implications from Complete Set | Must consider implications of modified opinions, emphasis of matter, going concern uncertainties, KAMs, and other information matters from complete set audit. |
| Adverse/Disclaimer on Complete Set | Cannot include unmodified opinion on single financial statement in same report; can only express unmodified opinion on specific element if not prohibited, not published together, and element is not a major portion. |
| Single Financial Statement Prohibition | NEVER express unmodified opinion on single financial statement if adverse/disclaimer on complete set (single financial statement is deemed a major portion). |
| Going Concern | HKSA 570 (Revised) is relevant even for specific elements; auditor's and management's responsibilities descriptions may need adaptation. |
| Key Audit Matters | Only required for single financial statements/elements of listed entities when required by law/regulation or auditor decides to communicate. |
| Other Information | HKSA 720 (Revised) applies when reports containing the single financial statement/element are considered annual reports. |
| Engagement Partner Name | Required for listed entities; may be included for other entities. |
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