Special Considerations in Audits of Financial Statements Prepared in Special Purpose Frameworks

What is NOT required of an auditor in determining the acceptability of the financial reporting framework applied to special-purpose financial statements?

1) Considering if the framework is explicitly stated in the financial statements

2) Assessing if the framework is acceptable under applicable laws and regulations

3) Determining if the framework is widely recognized and accepted in the organization's industry

4) Reviewing if management has applied the framework consistently

In accordance with AU-C 800, an auditor must determine if the framework is explicitly stated in the financial statements, assess if the framework is acceptable under applicable laws and regulations, and confirm if the framework is widely accepted in the industry. It is not required, however, for the auditor to review if the framework has been consistently applied by management. So, the correct answer is 1) Determining if the framework is widely recognized and accepted in the organization's industry.

According to AU-C 800, when determining the acceptability of the financial reporting framework applied to special-purpose financial statements, an auditor is required to consider, assess, and determine various elements. These include whether the framework is explicitly stated in the financial statements, whether it is acceptable under applicable laws and regulations, and if it is widely recognized and accepted in the organization's industry. However, the auditor is not required to review if the management has applied the framework consistently.

It is crucial to note that while consistency in application can provide added credibility to the financial reports, it is not a requirement of the auditor under AU-C 800.

So, the correct answer is 1) Determining if the framework is widely recognized and accepted in the organization's industry.