SA 805 requires the auditor, when engaged to audit a single financial statement (e.g. just a balance sheet) or a specific element of a financial statement (e.g. a schedule of inventory or accounts receivable for a lender), to apply the relevant Standards on Auditing adapted to that scope — which means materiality, risk assessment and evidence requirements are all determined with reference to that single statement or element on its own, not scaled down from a full financial statement audit's materiality.
What has to be re-thought for this scope, not reused
| Aspect | What SA 805 requires |
|---|---|
| Materiality | Determined with reference to the element being reported on — not a carried-over materiality figure from an unrelated full financial statement audit |
| Interrelated items | Elements that are closely interrelated with others not being audited (e.g. receivables and the related allowance, or revenue and receivables) need to be considered together, because testing one without the related item can miss the real risk |
| Evidence | Has to be sufficient and appropriate for the specific element — a general-purpose audit's working papers for that same balance may not be reusable as-is if the original scope and materiality differed |
Acceptance considerations specific to this engagement type
- 01Check whether the applicable framework is appropriate for the element in isolationSome frameworks are designed for a complete set of statements and produce a misleading picture if applied to one element alone.
- 02Consider whether the engagement is practicable at allIf forming an opinion on the element requires auditing items so interrelated that it amounts to needing a full financial statement audit in substance, SA 805 expects that to be identified before acceptance, not discovered mid-engagement.
- 03Build the restriction and framework basis into the reportAs with SA 800, the report needs to be clear about scope, and often carries a distribution restriction if it's prepared for a specific user such as a lender.
A single-element report is sometimes requested precisely because the full financial statements wouldn't support a clean opinion. SA 805 does not let the auditor sidestep that by narrowing scope — if the element can't be properly evidenced without reference to the rest of the statements, the engagement may not be one that can be accepted as framed.
This is practical guidance written for audit teams, not an authoritative statement of any standard or statute. Standards, forms and timelines change. Check the current text issued by the ICAI and the relevant authority before relying on anything here in an audit file.
Related resources
- Audit workflow & automationSA 320: materiality in planning and performing an auditOverall materiality and performance materiality are not the same number with a safety margin added — they answer two different questions.
- Audit workflow & automationSA 800: auditing financial statements prepared under a special purpose frameworkA tax-basis balance sheet prepared for a lender covenant isn't a smaller version of a general purpose audit. SA 800 requires the report to say so, explicitly, every time it's used.
- Audit documentationEngagement letters: what SA 210 requiresWhat an engagement letter must establish, when it needs renewing, and the gaps most often found on file inspection — undated letters and stale scope.
- Audit workflow & automationSA 700: forming an opinion, and what "true and fair" actually requires concluding onFinishing every planned procedure isn't the same as forming an opinion. SA 700 is the step that happens after the checklist, not instead of it.
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