—Guide
Special Purpose Audits: Grants, Contracts and Parent Company Reporting
When a special purpose audit is needed instead of the statutory audit, how SA 800 and SA 805 apply, and common examples for Indian businesses.
The statutory audit covers a company's full financial statements under the Companies Act. But businesses often need audited information for a different purpose: a grant, a contract, a regulator or a parent company. That's a special purpose audit. This guide explains when one is needed.
What Makes an Audit 'Special Purpose'
A special purpose audit is an audit of financial information prepared under a special purpose framework — a basis of preparation designed for a specific user's needs, such as the terms of a contract, a funder's reporting rules, or a parent company's group accounting manual. In India, the ICAI's SA 800 covers audits of special purpose financial statements, and SA 805 covers audits of single financial statements or specific elements, accounts or items.
Common Examples
- A statement of grant receipts and expenditure for a government or institutional funder.
- Financial information prepared under a joint venture or contract's definitions, like profit shares or cost pools.
- A single statement, like a statement of revenue for a royalty agreement.
- Reporting packages prepared under a foreign parent's accounting manual.
How It Differs From the Statutory Audit
- The framework is the special purpose basis, not the Companies Act and Accounting Standards.
- The auditor's report explains the basis of preparation and usually restricts use to the intended users.
- It gives reasonable assurance and an opinion — unlike an AUP engagement.
Special Purpose Audit or AUP?
If the user needs an opinion — for example, that a grant statement is prepared in accordance with the grant agreement — a special purpose audit is needed. If they just need specific checks performed and the results reported, AUP is usually quicker and cheaper.
How to Prepare
- Share the contract, grant agreement or reporting manual that sets the framework.
- Prepare the statement or information in the required format.
- Keep supporting records organised by the categories the statement uses.
- Agree the reporting deadline and format with the user early.
Getting Help
Think Filing performs special purpose audits for grants, contracts and group reporting, and advises whether an audit or AUP best fits the need.