This statement gives guidance on restricting the use of reports issued as a result of the technical literature in auditing. In particular, it defines the terms "general use" and "restricted use," it describes when the use of an auditor's report should be restricted, and finally, it outlines the language to be used in a restricted report.

"General use" reports are those reports that are not limited to specific parties, such as those reports prepared in conformity with GAAP, or certain comprehensive bases of accounting other than GAAP.

Definition of Restricted Use
"Restricted use" reports are those reports that are intended only for specified parties. Reports should be restricted in the following circumstances:

• The report is based on contractual agreements or regulatory provisions that are not in conformity with GAAP.
• The report is based on procedures specifically designed to meet the needs of a specified party who accepts the responsibility for the sufficiency of the work performed. An example of this type of restriction is an agreed-upon procedures engagement.
• The report is issued as a by-product of a financial statement audit in which the opinion is given on the financial statements taken as a whole and not one which provides assurance on specific subject matter in the report. Examples of by-product reports are: reports issued pursuant to Statement on Auditing Standards No. 60: Communication of Internal Control Related Matters Noted in an Audit; Statement on Auditing Standards No. 61: Communication with Audit Committees; and, Statement on Auditing Standards No. 62: Special Reports.

Additional Specified Parties
If the auditor adds other specified parties to the distribution of the report prior to the issuance of the restricted use report, he/she should obtain written acknowledgement from the other parties of their understanding of the nature of the engagement, the measurement/disclosure criteria used in the engagement, and the related report.

If the report has already been issued, it may be reissued, or the auditor can provide other written acknowledgement that other parties have been added as restricted parties.

Other Issues Regarding Restricted Reports
The auditor should inform the client that restricted use reports are not intended for use by parties not specifically identified. It is important to note, though, that the auditor is not responsible for controlling the report's actual distribution.

The necessary elements regarding restriction that should be included in a separate paragraph to the report are:

• a statement noting that the report is intended solely for the use of specified parties
• identification of the specified parties
• a statement that the report is not intended to be used by anyone other than the specified parties

This statement is effective for reports issued after December 31, 1998 with earlier application permitted.