A special purpose audit reports on special purpose financial statements prepared for a specific user and a specific reason under a special purpose framework, rather than for general circulation. CLA Emirates issues these reports under ISA 800 for banks, lenders, grant bodies, regulators and incoming shareholders as per their specific requirements.
Special purpose audit
A special purpose audit is an audit of financial statements prepared under a framework designed to meet the information needs of a particular user, such as a lender, a regulator or a funding body.
The framework may be a contractual basis, a regulator's prescribed format, or a cash basis rather than full IFRS. The auditor's report identifies the framework, names the intended users, and includes an emphasis of matter paragraph noting that the statements may not be suitable for any other purpose.
Need for a special purpose audit
A special purpose audit is appropriate when a third party requires independent assurance over financial information that is not covered by a general purpose financial statement audit, such as the financial results of a specific division, compliance with a loan covenant, expenditure incurred under a grant, or financial information relating to a particular reporting period. In the UAE, Tax Groups are required to prepare aggregated financial statements under a special purpose framework in accordance with the UAE Corporate Tax regulations. These aggregated financial statements must be audited in accordance with International Standard on Auditing (ISA) 800, Special Considerations—Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks.
Users of purpose audit reports in the UAE
Requests come from commercial banks, government and semi-government funding bodies, free zone and sector regulators, franchisors, landlords calculating turnover rent, and investors performing pre-acquisition review. In UAE, FTA mandates special purpose aggregated financial statements for tax groups.
Scoping a special purpose engagement
Scope is everything on these engagements. We agree the reporting framework, the intended user with you and, where appropriate, with the requesting party before fieldwork begins, so the report is not rejected on format after the work is done.
Common special purpose engagements
- Aggregated Financial Statements of Tax Groups
- Bank-required audits and lender reporting for facility renewal or covenant testing
- Grant audits and programme expenditure audits for funding bodies
- Regulatory returns in a prescribed format
- Turnover certificates for landlords and franchisors
- Divisional or branch accounts carved out of a larger entity
- Vendor accounts prepared for a prospective buyer
- Statements of assets and liabilities on a cash basis
