Overview & Learning Outcomes
While the SA 100–700 series applies to audits of complete sets of general purpose financial statements, the SA 800–899 series addresses specialised audit engagements. These standards adapt general auditing principles to financial statements prepared for specialized users, single statements, specific elements, or summarized financial data.
- Master SA 800: Understand the special considerations applicable to an audit of financial statements prepared in accordance with a special purpose framework, including acceptance, planning, performing, and mandatory alerting of readers via Emphasis of Matter and restriction on distribution or use.
- Master SA 805: Understand the considerations applicable to an audit of a single financial statement or a specific element, account or item of a financial statement, including lower materiality, interrelated accounts, and strict rules regarding adverse opinions or disclaimers on complete financial statements.
- Master SA 810: Master the responsibilities of an auditor when undertaking an engagement to report on summary financial statements derived from financial statements audited by the same auditor, including engagement acceptance pre-conditions, audit procedures, and reporting implications when full financial statements contain modified opinions.
Opening Scenario: CA Julie in Mumbai (Contractual Financial Reporting)
CA Julie joined a renowned audit firm in Mumbai. On her very first day, she was assigned an engagement to audit a client whose financial statements had been prepared specifically in pursuance to the financial reporting provisions of a commercial contract. The client had entered into agreements with various entities stipulating payment calculations based on specific contractual formulas and operational milestones.
The contract specifically required that financial statements be prepared considering the unique provisions of the contract rather than standard general-purpose frameworks. Julie found herself facing fundamental professional questions:
- Do Standards on Auditing (SAs) apply to such specialized contractual engagements?
- What special considerations must the auditor bear in mind before accepting such an assignment?
- Since the audit report would NOT be issued under the Companies Act, 2013, how should the report be structured?
- How can the auditor protect herself against third parties improperly relying on a report tailored exclusively for a specific contract?
Resolution & Professional Insight: Julie discovered that SA 800 provides comprehensive, authoritative guidance for this exact situation! SAs apply fully to such audits, but require the auditor to: (1) understand the purpose and intended users; (2) adapt SAs to circumstances; (3) describe the basis of accounting; and (4) include an Emphasis of Matter paragraph alerting readers that statements are prepared under a special purpose framework and restricting distribution and use!
SA 800: Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks
SA 800 deals with special considerations in the application of the Standards on Auditing (SAs) 100-700 series to an audit of financial statements prepared in accordance with a special purpose framework.
A Special Purpose Framework is defined as:
"A financial reporting framework designed to meet the financial information needs of specific users."
Contrast with General Purpose Framework: A general purpose framework (such as Ind AS or AS under Companies Act) is designed to meet the common financial information needs of a wide range of public users (investors, creditors, employees, public).
Real-World Examples of Special Purpose Frameworks:
- Contractual Basis: A cash receipts and disbursements basis of accounting for cash flow information that an entity may be requested to prepare for a bank loan agreement or commercial contract.
- Tax Authority Basis: The tax basis of accounting for a set of financial statements that accompany an entity’s tax return filed with revenue authorities.
- Regulatory Provisions: The financial reporting provisions of a government regulatory agency (e.g., State Electricity Regulatory Commission, Insurance/Pension authority provisions).
- Government Grant Contract: Financial reporting provisions prescribed by a donor agency or government body for monitoring a subsidized project or grant utilization.
When applying SA 210 (Agreeing the Terms of Audit Engagements) to a special purpose audit, the auditor must obtain an in-depth understanding of:
- The purpose for which the financial statements are prepared (e.g., contract compliance, grant monitoring);
- The intended users (e.g., lender bank, grant agency, tax department); and
- The steps taken by management to determine that the applicable financial reporting framework is acceptable in the circumstances.
- Compliance with all Relevant SAs: Under SA 200, the auditor shall comply with all SAs relevant to the audit. The auditor cannot pick and choose SAs simply because it is a special purpose engagement.
- Adapting SAs to Circumstances: The auditor adapts requirements (e.g., SA 315 understanding the entity requires understanding contract terms; SA 260 communication may be directed to parties specified in the contract; SA 570 going concern assessment depends on whether framework requires it).
When forming an opinion and reporting on special purpose financial statements under SA 700 (Revised), two critical protective mechanisms are prescribed:
To avoid misunderstandings by users who might obtain the financial statements, the auditor SHALL alert users of the auditor’s report by including an Emphasis of Matter (EOM) paragraph explaining that:
- The financial statements are prepared in accordance with a special purpose framework; and
- Consequently, the financial statements may not be suitable for another purpose!
Under SA 706 (Revised), this paragraph must be included within a separate section with an appropriate heading containing the term "Emphasis of Matter", with a direct cross-reference to the Note describing the basis of accounting.
In addition to the alert required above, the auditor may consider it appropriate to indicate that the auditor’s report is intended solely for the specific users. This is achieved by restricting the distribution or use of the auditor’s report.
"Emphasis of Matter – Basis of Accounting and Restriction on Distribution and Use:
We draw attention to Note X to the financial statements, which describes the basis of accounting. The financial statements are prepared to assist the Company in complying with the financial reporting provisions of the contract referred to above. As a result, the financial statements may not be suitable for another purpose. Our report is intended solely for the Company and DEF Company Limited and should not be distributed to or used by parties other than the Company or DEF Company Limited. Our opinion is not modified in respect of this matter."
Scenario: CA Lalita is statutory auditor of a company. She is also offered professional work to audit financial statements prepared specifically for meeting the requirements of a loan agreement for the same period. She chooses to accept the work and has made up her mind to disclose this fact in an “Emphasis of Matter Paragraph” in the audit report to be issued by her for this specific engagement. Is her approach proper?
1. Acceptance is Fully Valid: The approach of CA Lalita is completely proper. There is no legal or professional bar upon an auditor accepting an engagement to audit special purpose financial statements prepared under a loan agreement, even though she is the statutory auditor of the company for its general purpose financial statements.
2. Mandatory EOM Inclusion: Her decision to include an Emphasis of Matter paragraph is strictly in line with SA 800. SA 800 mandates that the auditor must alert users of the report by including an EOM paragraph stating that the financial statements are prepared in accordance with a special purpose framework and may not be suitable for another purpose.
Scenario: CA Lakshmi has prepared a draft audit report for financial statements of X Ltd prepared in accordance with the financial reporting provisions of a contract with Y Ltd. She has drafted an unmodified opinion. Besides, she has drawn attention to Note “A” describing the basis of accounting. How should she ensure that the report will not be misused? Draft a suitable paragraph to be included in the report.
1. Mechanism to Prevent Misuse: Under SA 800, to prevent third parties from improperly relying on the report, CA Lakshmi should restrict the distribution and use of the auditor's report solely to X Ltd and Y Ltd.
2. Suitable Draft Paragraph:
We draw attention to Note A to the financial statements, which describes the basis of accounting. The financial statements are prepared to assist X Ltd in complying with the financial reporting provisions of the contract with Y Ltd referred to above. As a result, the financial statements may not be suitable for another purpose. Our report is intended solely for X Ltd and Y Ltd and should not be distributed to or used by parties other than X Ltd or Y Ltd. Our opinion is not modified in respect of this matter."
SA 805: Audits of Single Financial Statements & Specific Elements
SA 805 (Revised) deals with special considerations in the application of Standards on Auditing (100-700 series) to an audit of a single financial statement or of a specific element, account or item of a financial statement.
- Single Financial Statement: A single statement forming part of a complete set of financial statements. For example:
- A Balance Sheet alone;
- A Statement of Profit and Loss alone;
- A Statement of Cash Flows alone; or
- A Statement of Changes in Equity alone.
- Specific Element, Account or Item: An isolated element, account, or line item of a financial statement. For example:
- Schedule of Accounts Receivable / Trade Debtors;
- Allowance for Doubtful Debts;
- Schedule of Externally Managed Assets / Investments;
- Schedule of Disbursements in respect of a Property;
- Provision for Employee Profit Sharing or Bonus; or
- Schedule of Lease Liabilities.
- Inclusion of Related Notes: A single financial statement or a specific element includes the related notes comprising a summary of significant accounting policies and other explanatory information.
- Scope Exclusion: SA 805 does NOT apply to the report of a component auditor issued for group audit purposes under SA 600.
SA 200 requires compliance with all SAs relevant to the audit. This applies irrespective of whether the auditor is also engaged to audit the complete set of financial statements.
If the auditor is NOT engaged to audit the complete set of financial statements:
- The auditor often lacks the deep understanding of the entity, its environment, and internal controls possessed by the auditor of the complete financial statements.
- The auditor lacks audit evidence regarding the general quality of accounting records.
- Therefore, the auditor must determine whether an audit of a single statement or element in accordance with SAs is practicable. Further corroborative audit evidence will be required!
- Materiality is Lower: Materiality determined for a single financial statement or for a specific element is ordinarily lower than the materiality determined for the entity’s complete set of financial statements!
- Auditing Interrelated Items: Many financial statement items are interrelated:
- Auditing Trade Receivables requires testing Credit Sales and Cash Receipts.
- Auditing Inventory requires testing Purchases, Cost of Goods Sold, and Trade Payables.
- Auditing Investments requires verifying Investment Income and Fair Value Reserves.
When an auditor undertakes separate engagements to audit the complete financial statements AND a single financial statement / specific element, separate opinions must be expressed for each engagement.
Rule 1: Absolute Prohibition on Single Financial Statements
If the auditor expresses an Adverse Opinion or Disclaimer of Opinion on the entity's complete set of financial statements as a whole:
👉 The auditor CANNOT express an unmodified opinion on a single financial statement that forms part of those financial statements!
Why? Because a single financial statement (e.g., Balance Sheet or P&L) represents a major portion of the complete financial statements. Expressing an unmodified opinion on a single statement would contradict and completely overshadow the adverse opinion or disclaimer on the complete set (piecemeal opinion prohibition).
Rule 2: Conditional Exception ONLY for a Specific Element
If an adverse opinion or disclaimer of opinion is expressed on the complete set, the auditor nevertheless may express an unmodified opinion on a specific element ONLY IF ALL THREE CONDITIONS ARE SATISFIED:
- The auditor is not prohibited by law or regulation from doing so;
- That opinion is expressed in an auditor’s report that is NOT published together with the auditor’s report containing the adverse opinion or disclaimer of opinion; AND
- The specific element does NOT constitute a major portion of the entity’s complete set of financial statements (e.g., auditing Property, Plant & Equipment schedule or Accounts Receivable schedule, provided it does not dominate the entire balance sheet).
Absolute Bar: An unmodified opinion can NEVER be expressed on a single statement of financial position (Balance Sheet) or single statement of profit and loss, because they inevitably constitute a major portion of the financial statements!
Scenario: An auditor is engaged to audit only the Schedule of Accounts Receivable of an entity under SA 805. The management argues that because the engagement is restricted solely to accounts receivable, the auditor should not examine sales invoices or bank statements. Is management's contention tenable?
1. Management's Contention is Untenable: Many financial statement items are fundamentally interrelated. Accounts receivable cannot be verified in isolation from credit sales transactions and subsequent bank collections.
2. Auditor's Procedural Mandate: In order to obtain sufficient appropriate audit evidence regarding the existence, valuation, completeness, and rights of accounts receivable, the auditor must examine sales contracts, billing records, credit terms, subsequent cash receipts in bank accounts, and customer confirmation requests under SA 505. Restricting access to sales or bank records would constitute a scope limitation!
Scenario: CA Vineet is invited to audit only the Balance Sheet of a manufacturing entity for bank credit purposes. CA Vineet was not the auditor of the complete set of financial statements. Discuss the practicality considerations before accepting such an engagement under SA 805.
Under SA 805, before accepting an engagement to audit a single financial statement where the auditor is not also engaged to audit the complete set, CA Vineet must determine whether the audit is practicable:
- He must consider whether he can obtain sufficient appropriate audit evidence without having audited the Statement of Profit and Loss and general accounting records.
- Balance Sheet assets and liabilities (e.g., closing inventory, depreciation, trade receivables, revenue reserves) depend entirely on operational transactions recorded in the income statement.
- If the auditor cannot obtain the required corroborative evidence or evaluate the internal control environment across the entity, the audit may not be practicable, and CA Vineet should not accept the engagement.
SA 810: Engagements to Report on Summary Financial Statements
SA 810 (Revised) deals with the auditor’s responsibilities when undertaking an engagement to report on summary financial statements derived from financial statements audited in accordance with SAs by that same auditor.
Summary Financial Statements: Historical financial information that is derived from financial statements but that contains less detail than the financial statements, while still providing a structured representation consistent with that provided by the financial statements of the entity’s economic resources or obligations at a point in time or the changes therein for a period of time. (Often termed "abridged financial statements" or "condensed financial statements" in corporate law).
The auditor shall accept an engagement to report on summary financial statements in accordance with SA 810 ONLY WHEN:
👉 The auditor has been engaged to conduct the audit of the financial statements from which the summary financial statements are derived!
Rationale: If the auditor has not audited the full financial statements, the auditor lacks the necessary knowledge of the entity, accounting systems, and audit evidence required to determine whether the summary financial statements are consistent with or represent a fair summary of the full statements.
Before accepting the engagement, the auditor shall determine whether the applied criteria are acceptable, considering:
- The nature of the entity;
- The purpose of the summary financial statements;
- The information needs of the intended users; and
- Whether the applied criteria will result in summary financial statements that are not misleading in the circumstances.
The auditor shall perform the following procedures as the basis for the audit opinion on summary financial statements:
- Disclosure of Summarised Nature: Evaluate whether summary financial statements adequately disclose their summarised nature and clearly identify the audited financial statements.
- Availability of Audited Financial Statements: When summary financial statements are not accompanied by audited financial statements, evaluate whether they describe clearly from whom or where the audited financial statements are available.
- Disclosure of Applied Criteria: Evaluate whether the summary financial statements adequately disclose the applied criteria.
- Comparison & Agreement: Compare the summary financial statements with the related information in the audited financial statements to determine whether they agree with or can be recalculated from the related information in the audited financial statements.
- Compliance with Applied Criteria: Evaluate whether the summary financial statements are prepared in accordance with the applied criteria.
- Appropriate Aggregation: Evaluate, in view of the purpose of summary financial statements, whether they contain the necessary information and are at an appropriate level of aggregation so as not to be misleading.
- Access without Undue Difficulty: Evaluate whether audited financial statements are available to intended users without undue difficulty.
| Status of Audited Financial Statements | Impact on Summary Financial Statements Report | Exact Reporting Wording |
|---|---|---|
| Unmodified Opinion on Audited FS | Express an unmodified opinion on summary financial statements if consistent and a fair summary. | "The summary financial statements are consistent, in all material respects, with the audited financial statements..." |
| Qualified Opinion on Audited FS | Can express opinion on summary FS, BUT the summary report must: (1) state audited report contains qualified opinion; (2) describe basis; and (3) describe effect on summary FS. | Include specific paragraphs detailing the qualification on full financial statements. |
| EOM / MURGC / KAM on Audited FS | The summary financial statements report must state that the audited report includes such paragraph(s) and describe the effect thereof. | Draw attention to the EOM / Going Concern uncertainty / KAM reported in full audit report. |
| Adverse Opinion or Disclaimer of Opinion on Audited FS | The auditor’s report on summary financial statements SHALL: • State that audited report contains adverse opinion or disclaimer; • Describe the basis for that opinion; and • State that, as a result, it is INAPPROPRIATE to express an opinion on the summary financial statements! |
Refusal to express opinion on summary financial statements! |
| Summary FS Not Consistent / Not a Fair Summary | If management refuses to make necessary changes to summary financial statements to bring them into agreement with audited FS: | Express an ADVERSE OPINION on the summary financial statements! |
The auditor’s report on summary financial statements may be dated later than the date of the auditor’s report on the audited financial statements. In such cases:
- The summary report shall state that the summary financial statements and audited financial statements do not reflect the effects of events that occurred subsequent to the date of the auditor’s report on the audited financial statements.
- The auditor is NOT required to obtain additional audit evidence on the audited financial statements or perform new subsequent event procedures!
Scenario: CA Madhur issued an audit report on full financial statements dated 15th June. The audit report on summary financial statements derived from such audited financial statements is dated 15th July of the same year. Discuss whether there exists any additional reporting responsibility for the auditor in such a situation.
1. Mandatory Disclosure of Subsequent Events Limitation:
- Under SA 810, when the auditor’s report on summary financial statements is dated later than the report on the audited financial statements, the auditor’s report on summary financial statements SHALL state that the summary financial statements and the audited financial statements do not reflect the effects of events that occurred subsequent to the date of the auditor’s report on the audited financial statements.
- CA Madhur is not required to perform additional audit procedures on subsequent events occurring between 15th June and 15th July, because summary statements are derived strictly from the already completed audit.
Scenario: Consider that the audit report on complete financial statements issued by CA Madhur contains a qualified opinion. Can he issue an unmodified opinion on the summary financial statements derived from such audited financial statements? Discuss.
1. Yes, Unmodified Opinion on Summary FS is Permitted: If CA Madhur is satisfied that the summary financial statements are consistent, in all material respects, with or are a fair summary of the audited financial statements in accordance with the applied criteria, he can express an unmodified opinion on the summary statements.
2. Mandatory Additional Disclosures Required in Summary Report: Under SA 810, because the audited financial statements contain a qualified opinion, the summary financial statements report must:
- State that the auditor’s report on the audited financial statements contains a qualified opinion;
- Describe the basis for the qualified opinion on the audited financial statements; and
- Describe the effect thereof, if any, on the summary financial statements.
Integrated Case Scenario: "Smart Investment Mutual Fund" Abridged Statements
Below is an extract of the abridged financial statements of two schemes of “Smart Investment Mutual Fund” as at 31st March 20XX and for the year ended 31st March 20XX, prepared by the Board of Trustees pursuant to SEBI regulations and format:
| Abridged Balance Sheet Items | Smart Investment Equity & Debt Fund (₹ in Lacs) | Smart Investment Equity Savings Fund (₹ in Lacs) |
|---|---|---|
| Unit Capital | 20,000.00 | 15,000.00 |
| Reserves and Surplus | 160,000.00 | 80,000.00 |
| Other Current Liabilities & Provisions | 100.00 | 100.00 |
| Total Liabilities | 180,100.00 | 95,100.00 |
| Investments | 170,000.00 | 90,000.00 |
| Deposits | 100.00 | 100.00 |
| Other Current Assets | 10,000.00 | 5,000.00 |
| Total Assets | 180,100.00 | 95,100.00 |
| Abridged Revenue Account Items | Equity & Debt Fund (₹ in Lacs) | Equity Savings Fund (₹ in Lacs) |
|---|---|---|
| Income | 34,000.00 | 1,000.00 |
| Expenses and Losses | 3,400.00 | 1,500.00 |
| Net Realized Gains / (Losses) | 30,600.00 | (500.00) |
| Add: Change in Unrealized Appreciation | 2,000.00 | 700.00 |
| Net Surplus / (Deficit) | 32,600.00 | 200.00 |
| Dividend Appropriation | 3,000.00 | 50.00 |
| Retained Surplus | 29,600.00 | 150.00 |
An Unmodified Opinion was expressed by the statutory auditor in the audit report on the full financial statements of the schemes. The auditor is now engaged to report on the abridged financial statements under SA 810.
Reason: Under SA 810, because the full financial statements received an unmodified opinion and the abridged financial statements agree with the audited statements and comply with SEBI applied criteria, an unmodified opinion is appropriate.
Reason: Standard definition of summary/abridged financial statements under SA 810 Para 4.
Reason: SA 810 specifically requires the auditor’s report to alert users that summary financial statements do not contain all the disclosures required by the framework applicable to the audited financial statements, and that reading them is not a substitute for reading the audited financial statements.
Reason: The auditor’s responsibility section in a summary report explicitly cites compliance with SA 810.
Reason: Key Audit Matters are communicated in the audit report on the complete general-purpose financial statements under SA 701. The summary report under SA 810 merely mentions whether KAM was communicated in the full report; it does NOT reproduce a KAM section!
Test Your Knowledge (TYK 1 to 9 — Comprehensive Solved Practical Questions)
Question: CA P is auditor of a company responsible for auditing the complete set of financial statements. He expresses an adverse opinion on the complete set of financial statements. The company requests CA P to audit only the Balance Sheet of the company as a separate engagement under SA 805 and issue an unmodified opinion on it. Can CA P express an unmodified opinion on the Balance Sheet?
1. Strict Prohibition under SA 805:
- Under SA 805 (Revised), if the auditor concludes that it is necessary to express an adverse opinion or disclaim an opinion on the entity’s complete set of financial statements as a whole, the auditor CANNOT express an unmodified opinion on a single financial statement that forms part of those financial statements.
- This applies even if the auditor’s report on the single financial statement is not published together with the auditor’s report containing the adverse opinion or disclaimer.
2. Rationale: A single financial statement (the Balance Sheet) constitutes a major portion of the entity's complete financial statements. Expressing an unmodified opinion on the Balance Sheet would directly contradict and overshadow the adverse opinion expressed on the financial statements as a whole (piecemeal opinion prohibition).
Conclusion: CA P CANNOT express an unmodified opinion on the Balance Sheet of the company!
1. Definition: Under SA 800, a Special Purpose Framework is a financial reporting framework designed to meet the financial information needs of specific users. The financial statements may be prepared in accordance with a fair presentation framework or a compliance framework.
2. Four Real-World Examples:
- Tax Basis: A set of financial statements prepared on a tax basis of accounting accompanying an entity's tax return.
- Cash Receipts & Disbursements: Cash basis of accounting for cash flow information prepared for bank lenders under a loan covenant.
- Contractual Provisions: Financial reporting provisions established under a joint venture agreement, project development agreement, or commercial franchise contract.
- Regulatory Agency Provisions: Financial reporting provisions established by a state regulatory body or licensing authority to regulate specific tariffs or subsidies.
Question: CA Y is auditor of Stekk Ltd. He expressed an adverse opinion on the complete set of financial statements. The company prepares summary financial statements and requests CA Y to report on them under SA 810. What are the reporting implications for CA Y?
Under SA 810 (Revised), if the auditor’s report on the audited financial statements contains an Adverse Opinion or a Disclaimer of Opinion, the auditor’s report on the summary financial statements SHALL:
- State that the auditor’s report on the audited financial statements contains an adverse opinion (or disclaimer of opinion);
- Describe the basis for that adverse opinion; and
- State that, as a result of the adverse opinion on the audited financial statements, it is INAPPROPRIATE to express an opinion on the summary financial statements!
Conclusion: CA Y must explicitly refuse to express an opinion on the summary financial statements!
Question: Mr. BK has been engaged by XYZ Ltd to report on summary financial statements. Mr. BK was NOT the auditor of the complete set of financial statements from which the summary financial statements are derived. Discuss whether Mr. BK can accept the engagement under SA 810.
1. Fundamental Acceptance Pre-Condition:
- Under SA 810, the auditor shall, ordinarily, accept an engagement to report on summary financial statements ONLY WHEN the auditor has been engaged to conduct an audit in accordance with SAs of the financial statements from which the summary financial statements are derived!
- If the auditor has not audited the full financial statements, he lacks the requisite audit evidence and understanding of the accounting records to determine whether the summary statements are consistent or fair.
Conclusion: Mr. BK CANNOT accept the engagement to report on the summary financial statements under SA 810.
Question: (i) When the auditor’s report on audited financial statements contains a qualified opinion, Emphasis of Matter paragraph, Material Uncertainty Related to Going Concern section, or Key Audit Matters, what additional matters must the summary report contain?
(ii) If summary financial statements are not a fair summary and management refuses to make changes, what is the impact on opinion?
Part (i): Additional Matters in Summary Report:
- Qualified Opinion: State that audited report contains a qualified opinion, describe the basis for qualification, and the effect thereof on the summary financial statements.
- EOM / MURGC / KAM: State that the audited report includes an Emphasis of Matter paragraph, a Material Uncertainty Related to Going Concern section, or Key Audit Matters, and describe the effect thereof on the summary financial statements.
Part (ii): If Summary Statements Not Consistent or Not a Fair Summary:
- If management refuses to make the necessary corrections, the auditor shall express an ADVERSE OPINION on the summary financial statements stating that they are not consistent, in all material respects, with or are not a fair summary of the audited financial statements.
Question: CA Rajni is statutory auditor of STS Ltd for FY 2025-26. She expresses an adverse opinion on the complete set of financial statements. She is also assigned the audit of the Property, Plant and Equipment (PPE) schedule as a separate engagement under SA 805, where she wishes to give an unmodified opinion. Can CA Rajni give an unmodified opinion on the PPE schedule?
Under SA 805, if the auditor expresses an adverse opinion on the complete set of financial statements, the auditor may nevertheless express an unmodified opinion on a specific element ONLY IF ALL THREE CONDITIONS ARE SATISFIED:
- The auditor is not prohibited by law or regulation from doing so;
- That opinion is expressed in an auditor’s report that is NOT published together with the auditor’s report containing the adverse opinion; and
- The specific element (PPE schedule) does NOT constitute a major portion of the entity’s complete set of financial statements.
Conclusion: CA Rajni can express an unmodified opinion on the PPE schedule provided the PPE does not constitute a major portion of the company’s total assets and the reports are published separately.
Question: Gold Opportunities Fund (Mutual fund) has audited unqualified financial statements for FY 2025-26 audited by M/s SH & Co. The management engages M/s SH & Co. to report on abridged financial statements prepared pursuant to SEBI regulations. Describe in detail the nature of procedures that M/s SH & Co. must perform under SA 810.
- Evaluate Disclosure of Summarised Nature: Ensure statements clearly disclose their abridged nature and identify the audited financial statements.
- Evaluate Disclosure of Applied Criteria: Verify reference to SEBI regulations.
- Compare & Reconcile: Compare the abridged financial statements with the audited financial statements to ensure figures agree with or can be recalculated from audited figures.
- Check Level of Aggregation: Ensure aggregation does not omit critical disclosures, misleading mutual fund investors.
- Availability of Audited FS: Verify that abridged statements state where full audited accounts are available to unit-holders without undue difficulty.
Question: CA Rohan expressed a qualified opinion on Horizon Ltd's complete financial statements due to inventory valuation misstatement. He is engaged to report on summary financial statements under SA 810.
(i) What specific additional disclosures must he include in the summary report?
(ii) If the audited report contained an adverse opinion, what elements are required?
(i) When Audited Report has Qualified Opinion:
- State that the auditor’s report on the audited financial statements contains a qualified opinion.
- Describe the basis for that qualified opinion (inventory valuation misstatement).
- Describe the effect thereof on the summary financial statements.
(ii) When Audited Report has Adverse Opinion:
- State that the auditor’s report on the audited financial statements contains an adverse opinion.
- Describe the basis for that adverse opinion.
- State that, as a result of the adverse opinion on the audited financial statements, it is INAPPROPRIATE to express an opinion on the summary financial statements!
Question: Grow Ltd presented summary financial statements for FY 2025-26 not accompanied by audited financial statements. Instead, a note states that audited financial statements are available at the company’s registered office. Explain the procedures you would perform under SA 810.
- Evaluate Clear Description of Availability: Under SA 810 Para 8(b), when summary statements are not accompanied by audited statements, verify whether they describe clearly from whom or where the audited financial statements are available (e.g., registered office address, website download link).
- Access without Undue Difficulty: Evaluate whether intended users can obtain ready access to the audited financial statements without undue difficulty or impediment.
- Standard Summary Procedures: Compare summary figures with audited records, test recalculability, ensure applied criteria disclosure, and verify appropriate level of aggregation.
Master Comparison Matrix: SA 800 vs SA 805 vs SA 810
| Dimension | SA 800 (Special Purpose) | SA 805 (Single FS / Elements) | SA 810 (Summary FS) |
|---|---|---|---|
| Scope & Subject Matter | Complete set of financial statements prepared under special purpose framework. | Single financial statement or specific element, account or item. | Summary historical financial statements derived from audited full FS. |
| Acceptance Pre-Condition | Understand purpose, users, and acceptability of framework. | Determine whether audit in accordance with SAs is practicable. | Mandatory: Auditor must have audited the full financial statements! |
| Materiality Standard | Determined in context of special purpose framework. | Ordinarily lower than materiality for complete financial statements. | Evaluated in context of consistency and fair summarization. |
| Key Reporting Safeguards | Mandatory EOM paragraph alerting readers & restriction on distribution/use. | Prohibition of unmodified opinion on single FS if adverse/disclaimer on complete set. | If adverse on full FS $implies$ Inappropriate to express opinion on summary FS! |