Hi I am Rohith. I am preparing CA exam. I want to know, What is a special purpose framework?
Special purpose frameworks (SPFs) include cash basis, modified cash basis, tax basis, regulatory basis, contractual basis, and other bases of accounting that utilize a definite set of logical, reasonable criteria that is applied to all material items appearing in the financial statements.
Engagement Acceptance This standard references the clarified SAS Terms of Engagement, which requires an auditor to evaluate the appropriateness of an entity's applicable financial reporting framework. For special purpose frameworks, this requires an auditor to consider the purpose for which the financial statements are prepared, the known users of the financial statements, and what management has done to determine the applicable reporting framework is appropriate for these circumstances. In an engagement letter, the auditor should obtain management's agreement that it is responsible for providing all informative disclosures (a fair presentation framework) in the financial statements and footnotes applicable to the financial reporting framework it has decided to use (its applicable reporting framework). Among those disclosures are: A description of the SPF, its significant accounting policies, and the main differences from US GAAP. Informative disclosures similar to those required by US GAAP. Contractual frameworks, in addition, would include any significant interpretations of the contract used in preparing the financial statements. Any additional disclosures necessary to comply with the requirements for a fair presentation framework in the clarified auditing standards. The client acceptance and continuance decision-making requirements originated in the quality control standards first published in the 1980s, and they are now required by current auditing standards. Obtaining and documenting relevant organizational, environmental, and operating information as a part of engagement acceptance or continuance is, of course, a condition precedent to obtaining an engagement letter and planning an engagement. As for audits of any framework, the engagement leader (sole practitioner or partner) should deliver and discuss the engagement letter contents, along with other engagement planning subjects, with the management or governance person of the reporting entity that has engaged the CPA firm. Performing a client acceptance and continuance evaluation and delivering an engagement letter are often the first steps for compliance with the leadership involvement requirements of the AICPA Statement of Quality Control Standards No. 8. Part 2 will begin discussing considerations for planning and performing an audit of a special purpose framework.
Dear Friend, as far as your query is concerned that What is a special purpose framework? Let me informed that Special purpose frameworks (SPFs) include cash basis, modified cash basis, tax basis, regulatory basis, contractual basis, and other bases of accounting that utilize a definite set of logical, reasonable criteria that is applied to all material items appearing in the financial statements. Special purpose frameworks, with the exception of the contractual basis of accounting, are commonly referred to as other comprehensive bases of accounting (OCBOA). By far, the tax and modified cash bases are the most frequently used SPFs today. Historically, there have been no definitive requirements for SPF financial statements. Hope answer was helpful to you Regards, Arjun Pratap Singh