ASB Rules on Use of Auditor's Report

January 1999 Issue
ASB Rules on Use of Auditor's Report
By Anthony J. Mancuso, CPA
The Auditing Standards Board issued Statement on Auditing Standards 87, Restricting the Use of an Auditor's Report, which provides guidance to auditors for determining whether an engagement requires a restricted-use report and, if so, what elements to include in that report. The SAS is effective for reports issued after December 31, 1998.
Restricted-use reports are intended only for specified parties. Restriction on the use of a report may result from the purpose of the report, the nature of the procedures applied in its preparation, the basis of or assumptions used in its preparation, the extent to which the procedures performed generally are known or understood, and the potential for the report to be misunderstood when taken out of the context in which it was intended to be used.
The SAS requires auditors to restrict a report's use in the following circumstances:
* The subject matter of the auditor's report or the presentation being reported on is based on measurement or disclosure criteria contained in contractual agreements or regulatory provisions that are not in accordance with generally accepted accounting principles or another comprehensive basis of accounting;
* The accountant's report is based on procedures specifically designed and performed to satisfy the needs of specified parties who accept responsibility for the sufficiency of the procedures; and
* The auditor's report is issued as a by-product of a financial statement audit and is based on the results of procedures designed to enable the auditor to express an opinion on the financial statements taken as a whole, not to provide assurance on the specific subject matter of the report.
In addition, SAS 87 does the
following:
* Specifies the language to be used in a restricted-use report,
* Presents the rationale for restricting the use of an auditor's report in each of the circumstances described,
* Replaces the terms "restricted distribution" and "general distribution" with the terms "restricted use" and "general use" (and defines the new terms) because auditors cannot control a client's distribution of restricted-use reports but can inform its intended users,
* Clarifies that an auditor may restrict the use of a report that ordinarily is a general-use report,
* Requires that an auditor restrict a combined report if it covers both subject matter or presentations that ordinarily do not require a restriction on use and subject matter or presentations that do require such a restriction, and
* Permits auditors to include a separate general-use report in a document that also contains a restricted-use report without affecting the use of either report.
SAS 87 amends paragraph 47 of SAS 75, Engagements to Apply Agreed-upon Procedures to Specified Elements, Accounts, or Items of a Financial Statement and deletes wording in SAS 60, Communication of Internal Control Related Matters Noted in an Audit. *

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