Single Financial Statement Audit

What is a Single Financial Statement Audit?

ISA 805 (Revised) governs engagements where the auditor forms an opinion on one financial statement — such as a statement of cash receipts and disbursements — or on a specific element of a financial statement, such as a schedule of accounts receivable or a royalty calculation.

ISA 805.7 applies all ISAs to the engagement. The full risk-based approach is required. What changes are three specific considerations that do not arise in a full-set audit.

First, materiality must be set relative to the single statement or element (ISA 805.10), not the full financial statements. A revenue schedule audit uses revenue as the materiality denominator, not total assets or profit before tax. This typically produces a lower materiality threshold because the denominator is smaller.

Second, the auditor must consider interrelationships between the element being audited and other components of the financial statements (ISA 805.11). Auditing a schedule of accounts receivable requires considering revenue recognition, deferred revenue, cash collections, and allowances for doubtful accounts. The element does not exist in isolation.

Third, ISA 805.13 addresses the risk of conflicting opinions. If the auditor issues an adverse opinion on the full set of financial statements but an unmodified opinion on a single element within those statements, the auditor must consider whether the element-level report effectively contradicts or undermines the full-set opinion.

Why it matters in practice

Teams frequently use full-set materiality benchmarks instead of element-specific ones. On a revenue schedule audit, the materiality calculation should reference total revenue, not the entity's total assets or profit before tax. Using the wrong denominator inflates materiality and reduces the sensitivity of the audit to misstatements that would be material in the context of the element being reported on.

Interrelationship documentation under ISA 805.11 is often missing entirely. A revenue schedule audit requires considering receivables, deferred revenue, and cash collections. A fixed asset schedule audit requires considering depreciation, impairment, and disposal gains or losses. If the file documents only procedures on the element itself without addressing how related balances affect its completeness and accuracy, ISA 805.11 has not been applied.

The conflicting opinions issue under ISA 805.13 is rare but critical. If the full-set audit results in a disclaimer of opinion due to scope limitations, issuing a clean ISA 805 opinion on an element within those same financial statements may undermine the credibility of the disclaimer. The auditor must assess whether the ISA 805 report could be interpreted as providing assurance that contradicts the full-set conclusion.

Key standard references

• ISA 805.7: Application of ISAs — all ISAs apply to single-statement and single-element engagements.
• ISA 805.10: Materiality — must be determined with reference to the single statement or element being audited.
• ISA 805.11: Interrelationships — the auditor must consider how other financial statement components affect the audited element.
• ISA 805.13: Conflicting opinions — the auditor must evaluate whether the element-level opinion undermines a modified full-set opinion.

Related terms

Frequently asked questions