[Anonymous]

NINJA Question –

Question #1443 is as follows:

Financial statements are considered special-purpose financial statements when:

Incorrect A.

prepared in accordance with either a regulatory or contractual basis of accounting.

B.

restricted as to use.

C.

prepared in accordance with either a contractual or an other comprehensive basis of accounting.

D.

prepared on a pro forma basis designed to demonstrate the effects of hypothetical transactions.

You answered A. The correct answer is C.

An entity’s compliance with aspects of contractual agreements or regulatory requirements related to audited financial statements is specifically listed as a special-purpose financial statement in AU-C 800.04 and .07.

I keep reading the explanation. It seems to me like the explanation is saying A is correct. If I’m completely missing something please explain.

THANKS

[Praying_To_Pass]

Hi! I think it's because a special purpose framework can also be on a cash or tax basis. Other comprehensive basis includes cash, tax, and regulatory. So A would be leaving out cash and tax. So while technically A is correct, C would be “more correct” because it includes cash, tax, regulatory, and contractual. Hope this helps!

AUD-PASS
REG-PASS
FAR-May 2015
BEC-July 2015

[Anonymous]

Thank you I stared at this question way to long. Should have just posted this hours ago. I just couldn't get over the fact in my mind that A was right. And the explanation confused me because it was almost word for word what A says. But after reading your posts that makes sense.

[Praying_To_Pass]

I know that feeling. Glad I could help! Good luck!

AUD-PASS
REG-PASS
FAR-May 2015
BEC-July 2015

[Author]

Replies