When a casual reader reads an audit report they expect to see a phrase that says something like “true and fair” or the more recent “fairly presented”. These are the words that indicate a “clean” report – so no need to read all the other boring detail!

The problem is – what about if those words are missing? What if the report just says “In our opinion, the accompanying financial statements of Client X Limited for the year ended xxxxx are prepared, in all material respects in accordance with the accounting policies stated in Note X,” [or whatever might be appropriate] And that’s it? Nothing about true and fair or fairly presented?

The wording above is what we are required to use in terms of ISA (NZ) 800 (revised) Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks if we are auditing certain kinds of financial statements. For example Illustration 2 from that standard: This really applies to the audit of special purpose report which are no General Purpose Financial Reporting (GPFRS).


Very applicable to the audit of Projects which requires a hybrid approach ie partial agreed upon procedures and usual audit reporting requirements. With the introduction of the $1m Constituency Funding from Samoa Government to all the Constituents in Samoa. Obviously, 0n the face of the “”District Council Establishment Fund Guidelines”, auditors at a glance will assume the engagement as an Agreed Upon Procedures (AUP).

However, there are more requirements to the guidelines as Government will still need an assurance reporting. These guidelines does not specify whether the constituencies (Itumalo Faapalota) are required to prepare a GPFRS or special purpose as judging from the guidelines, it’s a special purpose ie cash receipts and cash payments will be sufficed for this purpose.

Auditors not only in their capacity to advise the constituencies on general controls in regards to the administration of the funding to ensure compliance but also need the reasonable approach in developing a hybrid reporting to ensure that compliance and assurance are covered. (Tank) Tagaloa Faafouina Suá

The use of key audit matters as required by the new ISA 701 must be taken into consideration on the audit report in addition to findings from agreed upon procedures to put a depth and weighting in the report.

If auditing financial statements that are not prepared in terms of a fair presentation framework we cannot use any other phrases apart from “…prepared, in all material respects, in accordance with (or in terms of) …”. This is a “compliance framework” as opposed to “fair presentation” framework.


This is where the confusion arises. Special purpose reporting is likely to be compliance framework rather than fair presentation framework, but this is not always the case. 

ISA (NZ) 800 (6(b) says:

In addition, Paragraphs A2 and A3 of ISA (NZ) 800 state that it is possible for a special purpose framework set by an “authorised or recognised standards setting organisation” to be a fair presentation framework. 


The (surprisingly) popular “A Special Purpose Financial Reporting Framework for use by For-Profit Entities” (SPFR for FPEs) issued by CAANZ is an example of special purpose that is a fair presentation framework. This is explicitly stated in paragraph 1.12:

Similarly the Public Benefit Entity Simple Format Reporting – Accrual (not-for-profit)SFR – A (NFP)standard (Tier 3 PBE) is also “fair presentation” (A10):

Note however Public Benefit Entity Simple Format Reporting – Cash (Not-For-Profit) (PBE SFR-C (NFP)) is not a fair presentation framework.


As noted above fair presentation is not achieved automatically by sticking rigorously to the standard, but must also meet the goals of relevance, reliability, comparability and understandability. 

The SPFR for FPEs framework issues a caveat along the same lines when it says (paragraph 1.13):

So some rare cases may warrant a departure from the letter of the framework to achieve fair presentation. In these cases we need to have to look at the disclosures and make sure that:

  • management has concluded that the financial statements present fairly the entity’s financial position, financial performance and cash flows,
  • management has complied with applicable standards and interpretations, exceptthat it has departed from a particular requirement to achieve a fair presentation,
  • the title of the standard or interpretation from which the entity has departed, the nature of the departure, including the treatment that the framework would require,
  • the reason why that treatment would be misleading, and the treatment adopted; and
  • for each period presented, the financial effect of the departure on each item in the financial statements that would have been reported in complying with the requirement.

Speaking of jobs prepared in terms of IFRS, NZ IAS 1 summarises this neatly:


Our audit reports are treated as follows:

  • Tier 1 and 2 and Tier 3 PBE jobs are treated by default as fair presentation 
  • Tier 4 PBE jobs are treated as compliance by default.
  • In the SPFR for PBE jobs (including Body Corp jobs) there are two options – straight SPFR for PBE audit reports are fair presentation by default and the “generic special purpose” option is compliance by default.
  • SPFR for NFPs defaults to compliance.
  • NOTE: make sure you are using the 2016 update versions of these jobs if there is an option as these contain the current style audit reports – change to these versions if not.


  • Special purpose reporting may or may not be “fair presentation”.
  • SPFR for FPEs and Tier 3 PBE reporting may be regarded as “fair presentation”.
  • Other special purpose will generally not be “fair presentation” but instead be treated as “compliance” frameworks.
  • In these cases we can only report that they comply with the special purpose framework and need to reference what that framework is (as per contract, as per legislation, or as presented in the notes to the financial statements).
  • We cannot add any other other phrases in beyond this that hint at anything beyond compliance with the framework.
  • Even if financial reports prepared in terms of fair presentation frameworks meet the strict criteria, we must also ensure that they meet the goals of relevance, reliability, comparability and understandability – which in some rare cases may warrant a departurefrom the letter of the framework.
  • The default audit reports in Audit Assistant should always be regarded as starting point only – use your professional judgement in each case and amend if required

(Thanks to Zowie Pateman of CAANZ and Dawn Alexander of PKF Goldsmith Fox for their helpful input on this subject.)

 By Audit Assistant Founder Clive McGegg