Report on Special-Purpose Framework. Brooklyn Life Insurance Company prepares itsfinancial statements on a statutory basis in conformity with the accounting practices prescribed and permitted by the Insurance Department of the State of New York. This statutorybasis produces financial statements that differ materially from statements prepared in conformity with generally accepted accounting principles. On the statutory basis, for example,agents’ first-year commissions are expensed instead of being partially deferred.The company engaged its auditors, Major and Major Associates, to audit the statutory basisfinancial statements and report on them. Footnote 10 in the statements contains a narrative description and a numerical table explaining the differences between the statutory basis and GAAPaccounting. Footnote 10 also reconciles the statutory basis assets, liabilities, income, expense, andnet income (statutory basis) to the measurements that would be obtained using GAAP.Required:Write the audit report appropriate in the circumstances. The year-end date is December 31,2017, and the audit fieldwork was completed on February 20, 2018. (The company plansto distribute this report to persons other than the department of insurance regulators, so theauditors need to follow AU-C 800.)
Report on Special-Purpose Framework. Brooklyn Life Insurance Company prepares its
financial statements on a statutory basis in conformity with the accounting practices prescribed and permitted by the Insurance Department of the State of New York. This statutory
basis produces financial statements that differ materially from statements prepared in conformity with generally accepted accounting principles. On the statutory basis, for example,
agents’ first-year commissions are expensed instead of being partially deferred.
The company engaged its auditors, Major and Major Associates, to audit the statutory basis
financial statements and report on them. Footnote 10 in the statements contains a narrative description and a numerical table explaining the differences between the statutory basis and GAAP
accounting. Footnote 10 also reconciles the statutory basis assets, liabilities, income, expense, and
net income (statutory basis) to the measurements that would be obtained using GAAP.
Required:
Write the audit report appropriate in the circumstances. The year-end date is December 31,
2017, and the audit fieldwork was completed on February 20, 2018. (The company plans
to distribute this report to persons other than the department of insurance regulators, so the
auditors need to follow AU-C 800.)
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
