financial statements using another country's framework

7/29/2019 Financial Statements Using Another Country's Framework

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Financial Statements Using Another Country's Framework

I. Relevant AICPA Guidance

The relevant AICPA guidance is provided by AU 910: "Financial Statements Prepared in Accordance With

a Financial Reporting Framework Generally Accepted in Another Country." The standard states that the

auditor's objective, when engaged to report on financial statements prepared in accordance with a

financial reporting framework generally accepted in another country, is to address appropriately the

special considerations that are relevant to: (1) the acceptance of the engagement; (2) the planning and

performance of the engagement; and (3) the formation of an opinion and reporting on the financial

statements.

II. Acceptance of the Engagement

A. Considerations -- The auditor should obtain an understanding of (1) the purpose for which the

financial statements are prepared; (2) the intended users of the financial statements; and (3)

steps taken by management to determine that the framework is acceptable in the circumstances

B. Users -- The auditor should consider whether the intended users are likely to be familiar with

the applicable financial reporting framework

III. Performance of the Engagement

A. Use solely outside the U.S. -- When auditing financial statements intended for use solely

outside the U.S., the auditor should comply with GAAS, except for requirements related to the

form and content of the auditor's report. The auditor should obtain an understanding of the

entity's selection and application of accounting policies.

B. Consultation with others -- The auditor may wish to consult with others having expertise in

applying that country's reporting framework.

IV. Reporting

A. For use only outside the U.S.A -- The auditor should report either using (1) a U.S. form of

report (including a statement that refers to the note to the financial statements that describes

the basis of presentation, including the country involved); or (2) the report form and content of

the other country (identify the other country in the report).

B. For use both outside and inside the U.S.A -- If the financial statements are also intended for

use in the U.S.A, the auditor should report using the U.S. form of report, including an emphasis-

of-matter paragraph that (1) identifies the financial reporting framework used; (2) refers to the

note to the financial statements describing that framework; and (3) indicates that such a

framework differs from U.S. GAAP.

C. Summary of the differences in the audit reporting language relative to U.S. form. --

1. The first sentence would be changed as follows: ". . .financial statements, which, as

described in note X to the financial statements, have been prepared on the basis of (specify

the financial reporting framework generally accepted ) in (name of the country )."

2. The sentence describing management's responsibilities would be changed as follows:

"Management is responsible for the preparation and fair presentation of these financial

statements in accordance with (specify the financial reporting framework generally

accepted ) in (name of country );"

3. The second sentence in th e section on the auditor's responsibility would be changed as

follows: "We conducted our audit in accordance with auditing standards generally accepted



in the United States of America (and [in name of country ])."

4. The opinion would be changed as follows: "In our opinion, the financial statements referred

to above present fairly, in all material respects, . . . in accordance with (specify the financial

reporting framework generally accepted ) in (name of country )."

V. Sample Report

U.S. Form of Independent Auditor's Report to Report on Financial Statements Prepared in

Accordance With a Financial Reporting Framework Generally Accepted in Another CountryThat Are Intended for Use Only Outside the United States:

Independent Auditor's Report

(Appropriate Addressee)

We have audited the accompanying financial statements of ABC Company, which comprise the

balance sheet as of December 31, 20X1, and the related statements of income, changes in

stockholders' equity, and cash flows for the year then ended, and the related notes to the

financial statements, which, as described in note X to the financial statements, have been

prepared on the basis of (specify the financial reporting framework generally accepted ) in (nameof country ).

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements

in accordance with (specify the financial reporting framework generally accepted ) in (name of

country ); this includes the design, implementation, and maintenance of internal control relevant

to the preparation and fair presentation of financial statements that are free from material

misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordance with auditing standards generally accepted in the United

States of America (and [in name of country ]). Those standards require that we plan and perform

the audit to obtain reasonable assurance about whether the financial statements are free from

material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the financial statements. The procedures selected depend on the auditor's

judgment, including the assessment of the risks of material misstatement of the financial

statements, whether due to fraud or error. In making those risk assessments, the auditor

considers internal control relevant to the entity's preparation and fair presentation of the financial

statements in order to design audit procedures that are appropriate in the circumstances, but not

for the purpose of expressing an opinion on the effectiveness of the entity's internal control.

Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by

management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a

basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects,

the financial position of ABC Company as of December 31, 20X1, and the results of its operations

and its cash flows for the year then ended in accordance with ( specify the financial reporting

framework generally accepted ) in (name of country ).



(Auditor's signature)

(Auditor's city and state)

(Date of the auditor's report)



FlashcardsFlashcard #1 (FC7347)

When deciding whether to accept an engagement to

report on financial statements prepared in accordance

with a financial reporting framework generally

accepted in another country, what 3 matters should

the auditor consider?

1. The purpose for which the financial statements

are prepared;

2. The intended users of the financial statements;

and

3. The steps taken by management to determine

that the framework is acceptable in the

circumstances.

Flashcard #2 (FC7348)

To what extent must the auditor comply with GAAS

when auditing financial statements intended for use

solely outside of the U.S.A.?

The auditor should comply with GAAS, except for

requirements related to the form and content of the

auditor's report. (In this case, the auditor may report

either using a U.S. form of report or using the report

form and content associated with the other country.)


When financial statements are prepared in accordance

with a financial reporting framework generallyaccepted in another country and are intended for use

both outside and inside of the U.S.A., what effect does

that have on the auditor's report?

The auditor should report using the U.S. form of

report, including an emphasis-of-matter paragraphthat (1) identifies the financial reporting framework

used; (2) refers to the note to the financial

statements describing that framework; and (3)

indicates that such a framework differs from U.S.

GAAP.


When engaged to audit financial statements that are

prepared in accordance with a financial reporting

framework generally accepted in another country for

use solely outside the U.S.A., how is the

Management's Responsibility section of the auditor'sreport affected?

The sentence describing management's responsibilities

would be changed as follows: "Management is

responsible for the preparation and fair presentation of

these financial statements in accordance with (specify

the financial reporting framework generally accepted )in (name of country ); ...."


When engaged to audit financial statements that are

prepared in accordance with a financial reporting


use solely outside the U.S.A., how is the Auditor's

Responsibility section of the auditor's report affected?

The second sentence in the section on the auditor's

responsibility would be changed as follows: "We

conducted our audit in accordance with auditing

standards generally accepted in the United States of

America (and [in name of country ])."


When engaged to audit financial statements that areprepared in accordance with a financial reporting


use solely outside the U.S.A., how is the opinion

paragraph of the auditor's report affected?

The opinion would be changed as follows: "In ouropinion, the financial statements referred to above

present fairly, in all material respects, ... in accordance

with (specify the financial reporting framework

generally accepted ) in (name of country )."

financial statements using another country's framework

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