What does applicable financial reporting framework mean on the CPA exam?
Applicable financial reporting framework. The framework management adopts for the statements, such as GAAP or a special purpose framework. The opinion is expressed against it, so naming an incorrect one points the opinion at a standard the statements were never prepared under.
Defined against AU-C 200.14.
Which CPA exam sections use applicable financial reporting framework?
Applicable financial reporting framework appears in the AUD section of the CPA exam.
Other terms defined against AU-C 200
- control risk: The risk that the entity's own controls will not prevent, or detect and correct, a material misstatement on a timely basis.
- inherent risk: The susceptibility of an assertion to material misstatement before any control is considered.
- level of assurance: How much confidence the practitioner expresses.
- professional skepticism: An attitude that includes a questioning mind and a critical assessment of evidence.
- risk of material misstatement: The risk that the statements are materially misstated before the audit begins.
Related terms
- NIST Cybersecurity Framework: A voluntary framework of cybersecurity outcomes organized into functions.
- contractual basis: A special-purpose framework built from the terms of a contract, used when two parties agree how the numbers will be prepared for their own purposes.
- cash basis: Recognizing revenue when cash is received and expense when cash is paid.
- regulatory basis: A special-purpose framework required by a regulator, such as an insurance department's rules.
- COSO Internal Control - Integrated Framework: The reference model for internal control: five components and seventeen principles, all of which must be present and functioning for control to be effective.
- internal control over financial reporting: A process designed to provide reasonable assurance regarding the preparation of reliable financial statements.