[j3cpa]

“In our opinion, the financial statements referred to above, present fairly, in all
material respects, the financial position of X Company as of [at] December 31,
20X2 and 20X1, and the results of its operations and its cash flows for the years
then ended in conformity with accounting principles generally accepted in the
United States of America.”

I keep hearing that the term AFRF (applicable financial reporting framework) use in audit opinions, but I can’t find any opinion with the correct terminology.

When would a CPA use AFRF instead of “accounting principles generally accepted in the USA”? Anybody know?

Is this when a CPA issue opinion on a Cash Basis or Tax Basis F/S?

Thanks

Study Material:
GLEIM
BEC - FEB/2012
AUD - FEB/2012
FAR - JULY/2012
REG - JULY/2012

[Snickets]

I believe it is used when you issue an opinion on financial statements,not prepared in conformity with GAAP.
Sometimes these statements are cash basis or non GAAP but still need an opinion in order to secure a loan or be in compliance with a 3rd party lender etc.

I'm sure someone on here with fresher knowledge may be a able to explain it better but IIRC it is because the statment ls are not GAAP compliant, and therefore you cannot state that they are in the audit opinion. The terminology in the opinion should reflect the basis of accounting used to perpare the statments.

There should be exact examples in your book, if not then in the AL. I was able to find the terminology in the AL during my exam as well.

AUD 84
FAR. 78(expired/retake 5/9/16)
BEC 77
REG 76

[j3cpa]

I found my answer in AU-C 80. For the special framework audit report. Include the basis of accounting in the opinion paragraph and attach an emphasis of the matter/other matter paragraph stating the basis of accounting.

Example for Tax Basis Opinion unmodified:

“Opinion
In our opinion, the financial statements referred to above present fairly, in all
material respects, the assets, liabilities, and capital of ABC Partnership as of
December 31, 20X1, and its revenue and expenses and changes in partners' capital
accounts for the year then ended in accordance with the basis of accounting
the Partnership uses for income tax purposes described in Note X.
Basis of Accounting4
We draw attention to Note X of the financial statements, which describes the basis
of accounting. The financial statements are prepared on the basis of accounting
the Partnership uses for income tax purposes, which is a basis of accounting
other than accounting principles generally accepted in the United States of
America. Our opinion is not modified with respect to this matter.”

Study Material:
GLEIM
BEC - FEB/2012
AUD - FEB/2012
FAR - JULY/2012
REG - JULY/2012

[Author]

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