## Financial Reporting Frameworks
Every set of financial statements (FS) is prepared under a financial reporting framework (FRF). The nature of that framework determines the type of FS and the auditor's obligations.
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### 1. General Purpose Framework
- FS are prepared and presented for the general public (investors, lenders, regulators, etc.).
- Example: Listed company annual accounts under Ind AS / Schedule III.
### 2. Special Purpose Framework
- FS are prepared and presented for specific users only.
- Example: A borrower prepares FS specifically because a bank demands it as a condition for a loan (submitted to bank on their requirement).
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### Sub-classification by presentation objective
| Fair Presentation Framework | Compliance Framework | |
|---|---|---|
| Core idea | FS must give a true and fair view | FS must comply with the applicable FRF |
| Additional disclosures | Entity may add disclosures beyond FRF requirements to achieve fair presentation | Not required beyond FRF |
| Departure from FRF | Permitted in extremely rare situations where strict compliance would be misleading | Not permitted |
| Preparation basis | Prepared as per applicable FRF (e.g., Ind AS) | Same, but no override clause |
> Key point for exam: In a fair presentation framework, when the auditor concludes that compliance with a specific requirement would be misleading, a departure is allowed — but this is extremely rare and must be disclosed.
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### Why this matters for the auditor
- The type of framework determines the form of audit opinion (unmodified vs. modified).
- Under a fair presentation framework the auditor evaluates whether FS present fairly; under a compliance framework the auditor evaluates whether FS comply with the FRF.