Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

Reports on special purpose frameworks are typically issued in connection with?

1. Interim financial information reviewed for modifications to GAAP.

2. Compliance with reporting requirements for a regulatory agency.

3. Pro forma financial presentations for hypothetical transactions.

4. Feasibility studies illustrating operational results.

The correct answer is: Compliance with reporting requirements for a regulatory agency.

Reports on special purpose frameworks are typically issued in connection with compliance with reporting requirements for a regulatory agency because these frameworks are designed to meet specific needs or criteria that are distinct from Generally Accepted Accounting Principles (GAAP). Regulatory agencies often require financial statements that align with particular guidelines or formats tailored to certain industries or scenarios, such as tax returns or contracts. Special purpose frameworks, such as cash basis accounting or tax basis accounting, deliver relevant financial information that adheres to the regulatory demands, thus serving a specific audience or purpose. The focus is on compliance; therefore, the reporting will align with the stipulations set forth by regulators, ensuring that stakeholders receive the necessary financial insights for assessments or decisions based on this information. Other contexts, like interim financial information or pro forma financial presentations, do not rely predominantly on special purpose frameworks within this compliance realm, as they may still aim to present information more aligned with traditional principles or hypothetical scenarios rather than specific regulatory needs. Similarly, feasibility studies often concern operational results without the stringent requirements typical in regulatory compliance contexts.