Audit Procedures for Special Purpose Financial Statements:

Special purpose financial statements are prepared for a specific purpose or user and may not follow the generally accepted accounting principles $($GAAP$)$ that are applicable to regular financial statements. The audit procedures for special purpose financial statements are tailored to the specific needs and objectives of the users. The procedures may include verification of specific account balances, transactions, or compliance with contractual agreements.

Key Features of Audit Procedures for Special Purpose Financial Statements:

Customization: Audit procedures for special purpose financial statements are customized based on the specific requirements and objectives of the users. The auditor works closely with the client to identify the areas of focus and the nature of procedures needed.

User$-$Specific Standards: The audit may be conducted based on user$-$specific standards or criteria agreed upon between the client and the users of the financial statements. This could differ from the generally accepted accounting principles $($GAAP$)$ used in regular financial statements.

Focused Testing: Audit procedures may be more focused and specific compared to audits of regular financial statements. The auditor targets areas that are relevant to the intended users and the purpose for which the financial statements are prepared.

Clear Communication: Communication between the auditor, the client, and the intended users is crucial in special purpose financial statement engagements. The auditor ensures that the procedures and findings are aligned with the expectations of the users.

Question:

What is a distinctive characteristic of audit procedures for special purpose financial statements?

A$)$ Strict adherence to GAAP

B$)$ User$-$specific customization

C$)$ Broad$-$based testing approach

D$)$ Limited communication with users