Jan 7th 2014
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This is the third installment of Auditing Special Purpose Frameworks. Part 1 is here and Part 2 is here. Read more by Larry Perry, CPA, here and see even more in his Today's World of Audits archive.
More Income Tax Basis Principles
In my previous article, I began discussing audit planning requirements. Among those requirements is an auditor’s responsibility to understand an entity’s applicable financial reporting framework. In this series of writings, the audit strategies discussed will apply to audits of all financial reporting frameworks but focus specifically on two special purpose frameworks, the income tax basis and the FRF for SMEs basis.
The last article in this series summarized four basic principles for the income tax basis. Other basic principles for this basis are presented below.
All financial reporting frameworks are required to be fair presentation frameworks. Defined in the Clarified Auditing Standard, Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance With Generally Accepted Auditing Standards (AU-C 200.14) a fair presentation framework includes all disclosures necessary to enable a user of the financial statements to effectively evaluate the financial position and results of operations of the reporting entity. To accomplish this objective for all financial reporting frameworks, required disclosures often extend beyond the basic principles of the framework.
While this list of tax basis principles is not exhaustive, it does underpin an auditor’s approach to planning and performing an audit. In the next article in this series, some of the basic principles for the FRF for SMEs will be presented. As always, I invite your questions and comments, either directly below the article or sent to my personal email address, firstname.lastname@example.org.