ISA 805 (Revised) — Audits of Single Financial Statements and Specific Elements: Complete Guide

Key Takeaways

ISA 805 (Revised) addresses engagements to audit a single financial statement (such as a balance sheet only) or a specific element, account, or item of a financial statement (such as an accounts receivable schedule or royalty calculation).
Materiality must be set at the element level, which typically results in lower thresholds than a full financial statement audit — element audits can be more work-intensive relative to their size.
The auditor must consider interrelationships between the element being audited and other financial statement components, obtaining evidence on related amounts and disclosures even though they are not the primary subject.
When an adverse opinion or disclaimer has been expressed on the complete financial statements, the auditor must not express an unmodified ISA 805 opinion on a single statement or element included in those financial statements.
These engagements are a significant revenue source for European audit firms, arising from bank covenant compliance, grant accountability, regulatory reporting, and contractual obligations.
ISA 805 differs from ISA 800: ISA 800 covers complete sets under special purpose frameworks, while ISA 805 covers single statements and specific elements regardless of framework.

Why ISA 805 Matters

Auditors are not always engaged to audit a complete set of financial statements. A lender may require an audit of only the balance sheet. A regulator may need assurance on a specific schedule of assets. A dispute resolution process may require an audited computation of royalties or profit-sharing. A pension fund may need an audit of its schedule of externally managed assets. ISA 805 (Revised) addresses these engagements where the subject is either a single financial statement or a specific element, account, or item of a financial statement.

These engagements are commercially significant for mid-tier and smaller firms across Europe. They frequently arise from commercial transactions, regulatory requirements, or contractual obligations where a full-scope audit is neither required nor cost-effective, but independent assurance on specific financial information is needed.

Scope and Key Definitions

ISA 805 (Revised), effective for periods ending on or after 15 December 2016, addresses special considerations in two categories:

Single financial statement: An audit of one financial statement — for example, a balance sheet only, an income statement only, or a statement of cash receipts and disbursements. The single statement may be prepared under a general purpose or special purpose framework.

Specific element, account, or item: An audit of a specific component of a financial statement. Examples include:

Category	Examples
Assets	Accounts receivable, inventory, investment portfolio, property valuations
Liabilities	Accrued benefits of a pension plan, provision for insurance claims, loan balances
Revenue/expenses	Revenue from specific contracts, royalty calculations, profit participation computations
Schedules	Schedule of externally managed assets, schedule of net tangible assets, schedule of disbursements under a grant
Other	Compliance with financial covenants, tax computation schedules

The specific element may be a single item, several items, or a component of an item. It includes related disclosures (notes). When ISA 805 refers to "specific elements," it means these elements together with any related notes.

Important distinction from ISA 800: ISA 800 deals with audits of complete sets of financial statements under special purpose frameworks. ISA 805 deals with audits of single financial statements (whether under general purpose or special purpose frameworks) and specific elements (regardless of framework). When a single financial statement is prepared under a special purpose framework, both ISA 800 and ISA 805 apply.

Acceptance Considerations

Acceptability of the Framework

For a single financial statement, the auditor must determine whether the financial reporting framework applied to prepare the statement is acceptable. A balance sheet prepared under IFRS, for example, uses an acceptable framework — but the auditor must consider whether the single statement (without the full set) can achieve adequate presentation or appropriate disclosure.

For a specific element, the auditor evaluates whether the criteria used to prepare the element constitute an acceptable financial reporting framework or suitable criteria. The criteria may come from a recognised framework (such as IFRS requirements for revenue recognition applied to a revenue schedule) or from specific criteria established in a contract.

Relationship with the Complete Set Audit

ISA 805 engagements may be undertaken:

Alongside an audit of the entity's complete financial statements (by the same auditor)
Independently of any audit of the complete financial statements (the entity may or may not have a separate full-scope audit)
By a different auditor than the one auditing the complete financial statements

When the engagement is alongside a complete financial statement audit, the auditor should consider whether the single statement or element can be audited without performing substantially all the work required for a complete audit. If the element is so pervasive that a full audit would essentially be needed (for example, auditing "profit" requires revenue, expenses, and related balance sheet items), the auditor should discuss with the engaging party whether a complete financial statement audit would be more appropriate.

Special Considerations in Planning and Performing

Materiality

Materiality is one of the most significant practical differences in ISA 805 engagements:

For a single financial statement: Materiality is determined by reference to that financial statement, not the complete set. Materiality for a balance sheet audit would be based on total assets or net assets, not on revenue or profit measures that relate to the income statement.

For a specific element: Materiality is determined by reference to that element. This typically results in a lower materiality than would apply to the complete financial statements. Auditing a schedule of accounts receivable with a carrying amount of €5 million will have a much lower materiality threshold than an audit of the full financial statements of a €200 million revenue entity.

Materiality Trap

The lower materiality in element audits is a frequent source of scope problems. An audit of "inventory" at materiality based on the inventory balance may require the auditor to examine items that would be immaterial in a full financial statement audit. Plan for this — element audits can be more work-intensive relative to their size than their full-scope equivalents.

Audit Evidence and Interrelationships

Financial statement elements do not exist in isolation. Accounts receivable are related to revenue. Inventory is related to cost of goods sold. Provisions are related to expenses. The auditor must consider these interrelationships:

If the engagement is to audit accounts receivable, the auditor may need to evaluate revenue recognition to assess the completeness and accuracy of receivables
If auditing a provision, the auditor may need to understand the underlying transactions and events that gave rise to the provision
If auditing a profit-sharing calculation, the auditor effectively needs to understand the revenue and expense components that determine profit

The auditor must obtain sufficient appropriate evidence about related amounts and disclosures even though they are not the primary subject of the engagement.

Going Concern

For a single financial statement audit, going concern considerations apply in the same way as for a complete audit. For a specific element audit, going concern may or may not be relevant depending on the element. An audit of a schedule of assets may be affected by going concern (if the entity is not a going concern, asset valuations may be affected), while an audit of a royalty calculation may not be directly affected.

Forming the Opinion and Reporting

Opinion Wording

Single financial statement (fair presentation framework): "In our opinion, the balance sheet presents fairly, in all material respects, the financial position of [Entity] as at [date] in accordance with [framework]."

Specific element (compliance criteria): "In our opinion, the schedule of accounts receivable is prepared, in all material respects, in accordance with [the criteria described in Note X / the requirements of the loan agreement dated...]."

When the single statement or element is prepared under a special purpose framework, the auditor includes the mandatory EOM paragraph required by ISA 800 regarding the basis of accounting and potential restriction on distribution.

The Critical Rule — Adverse Opinion or Disclaimer on the Complete Set

This is one of ISA 805's most important requirements:

When the auditor has expressed an adverse opinion or disclaimer on the entity's complete set of financial statements, the auditor must consider whether it is appropriate to also report on a single financial statement or specific element. The reason is that a report on a single statement or element could effectively contradict or undermine the adverse opinion or disclaimer:

Complete Set Opinion	ISA 805 Engagement Permitted?
Unmodified	Yes — no restriction
Qualified	Yes — provided the matter causing qualification does not affect the element being reported on
Adverse	Only if the single statement/element is not included in the financial statements on which the adverse opinion was expressed. If included, the auditor shall not express an unmodified opinion
Disclaimer	Only if the matter underlying the disclaimer does not affect the element. If the scope limitation was pervasive, expressing an opinion on any element would be inappropriate

Practical example: The auditor expressed an adverse opinion on the complete financial statements because inventory was materially misstated. If the ISA 805 engagement is to audit accounts receivable, and the inventory issue does not affect accounts receivable, the auditor may express an unmodified opinion on the receivables schedule. But if the ISA 805 engagement is to audit a balance sheet (which includes inventory), an unmodified opinion would be inappropriate because the balance sheet would also be materially misstated.

Published Alongside

When the auditor's report on a single financial statement or element is published alongside the auditor's report on the complete financial statements, the auditor should consider whether the single statement or element is sufficiently differentiated. If the single financial statement could be mistaken for the complete set, the auditor should discuss appropriate labelling and presentation with management.

Report Structure

The ISA 805 report follows the ISA 700 structure with the same modifications as ISA 800 (where applicable) plus:

Clear identification of the single financial statement or specific element
Materiality reference appropriate to the engagement scope
If relevant, reference to the auditor's report on the complete financial statements (including the type of opinion expressed)
EOM paragraph for restriction on distribution/use where appropriate

Common ISA 805 Engagement Scenarios

Bank covenant compliance — net tangible assets schedule. A loan agreement requires quarterly audited certification of net tangible assets. The auditor audits the schedule against the covenant definition, which may differ from GAAP (for example, excluding intangible assets and goodwill). Materiality is set by reference to the covenant threshold, not overall financial statement materiality.

Profit-sharing calculation for employees or partners. A profit participation agreement requires audited calculation of distributable profit. The auditor must understand all revenue and expense items that feed the calculation and verify the computation against the agreed formula.

Insurance claims provision — actuarial schedule. A regulator requires an audited schedule of the liability for incurred but not reported (IBNR) claims. The auditor works with actuarial experts (ISA 620) and evaluates the provision against the regulatory framework or actuarial standards.

Pension fund — schedule of externally managed assets. A pension fund trustee requires an audited schedule of assets held by external managers. The auditor confirms holdings, valuations, and income with the external managers and custodians.

Grant compliance — schedule of eligible expenditures. A government agency requires an audited schedule of expenditures under a grant agreement. The auditor verifies each expenditure against the grant's eligibility criteria.

European Jurisdiction Implementations

Netherlands. Dutch practice encounters ISA 805 engagements primarily in the context of subsidie-verantwoordingen (subsidy accountability reports), where government agencies require audited schedules of grant expenditures. The NBA has published specific guidance through its Handreiking series for subsidy accountability audits. Additionally, Dutch financial institutions may require audited schedules of specific regulatory metrics for DNB reporting. For jaarrekening audits where a separate report on a specific element is requested (such as a balance sheet certification for a stichting), the auditor must carefully distinguish between the scope of the BW 2 statutory audit and the ISA 805 engagement. NBA Standard 805 aligns with the international standard while addressing Dutch-specific engagement types.

Germany. German auditors perform ISA 805-equivalent engagements under IDW PS 805 particularly for Sonderprüfungen (special audits). Common scenarios include auditing specific schedules required under Gesellschaftsverträge (partnership agreements) for profit allocation, auditing schedules of assets for regulatory purposes under BaFin frameworks, and providing audited certifications of financial data required for Fördermittel (government subsidies/EU structural funds). The Bescheinigung (certificate) that the auditor provides in these engagements follows specific IDW format requirements. German practitioners must also be familiar with audits of Einnahmen-Überschuss-Rechnungen (income surplus calculations) for smaller entities, which may constitute a single financial statement under a tax basis framework.

United Kingdom. ISA (UK) 805 mirrors the international standard closely. Common engagements include auditing solicitors' client accounts (required by the SRA), auditing charity accounts for specific restricted funds, bank covenant certifications, and regulatory capital calculations for FCA-regulated firms. The ICAEW and ACCA have published technical guidance on specific ISA 805 engagement types. For academies and multi-academy trusts, specific element audits may be required by the ESFA (Education and Skills Funding Agency) for particular funding streams. The UK charity sector frequently requires audits of specific fund balances under the Charities SORP framework.

France. French commissaires aux comptes perform ISA 805-equivalent work under NEP 9080 for specific elements, frequently in the context of attestations (certifications) on financial data required for specific purposes. Common scenarios include certifying revenue or profit figures for redevances (royalties/license fees), auditing specific schedules for subventions publiques (public subsidies), and providing reports on compliance with financial covenants in contrats de financement (financing agreements). The CNCC (Compagnie Nationale des Commissaires aux Comptes) provides guidance on the form of attestation reports. French practice distinguishes carefully between missions d'audit (audit engagements) under ISA 805 and attestations particulières (specific certifications) that may fall under ISAE 3000 or other frameworks depending on the level of assurance required.

Relationship with Other Standards

ISA 800 — Applies in addition when the single statement or element is prepared under a special purpose framework
ISA 700 — Provides the base report structure that ISA 805 adapts
ISA 705 — Modified opinions follow the same framework; the interaction with the complete set opinion is critical
ISA 706 — EOM paragraphs may be needed for restriction on distribution or to reference the complete set audit
ISA 620 — Auditor's experts may be needed for specific elements (actuarial provisions, valuations)
ISA 320 — Materiality must be determined by reference to the specific element, not the complete financial statements
ISA 510 — Opening balances may require specific consideration for recurring ISA 805 engagements

Frequently Asked Questions

What is the difference between ISA 800 and ISA 805?

ISA 800 deals with audits of complete sets of financial statements prepared under special purpose frameworks. ISA 805 deals with audits of single financial statements (whether under general purpose or special purpose frameworks) and specific elements, accounts, or items of a financial statement (regardless of framework). When a single financial statement is prepared under a special purpose framework, both ISA 800 and ISA 805 apply.

How is materiality determined in an ISA 805 engagement?

Materiality is determined by reference to the single financial statement or specific element being audited, not the complete set of financial statements. For a balance sheet audit, materiality would be based on total assets or net assets. For a specific element such as accounts receivable, materiality is based on that element's carrying amount — typically resulting in a much lower materiality threshold than a full financial statement audit.

Can an auditor issue an unmodified ISA 805 opinion when the complete financial statements received an adverse opinion?

Only if the single statement or element is not included in the financial statements on which the adverse opinion was expressed. For example, if the adverse opinion was due to misstated inventory, the auditor may still issue an unmodified opinion on an accounts receivable schedule (if unaffected), but could not issue an unmodified opinion on a balance sheet that includes the misstated inventory.

What are common ISA 805 engagement types in European practice?

Common engagements include bank covenant compliance certifications (net tangible assets schedules), profit-sharing calculations, insurance claims provision audits, pension fund asset schedule audits, grant compliance schedules, subsidy accountability reports (Netherlands), Sonderprüfungen under partnership agreements (Germany), solicitors' client account audits (UK), and royalty/license fee certifications (France).