assurance on forecasts

Question 1

acceptance consideration for new clients

Answer 1

nature and circumstances:

-intended use of information
-general or limited distribution
-nature of assumptions: best estimate or hypothetical
-elements in the forecast
-period covered by the forecast
-level of assurance and expected users of the report

client integrity and ethical values:
-CDD
-for non audit client, contact existing auditors
-reasons for not appointing their existing auditors
-potential for management bias, overoptimism.

firm’s ability
time?
resources?

-IESBA code of ethics must be followed. if audit client, self review threat, conflict of interest

conclusion: to accept or not

Question 2

evaluation and completeness of assumptions used in forecasts

Answer 2

-evaluate trends
-do assumptions seem optimistic?
-look for missing information

Question 3

procedures for assumptions

Answer 3

-to assess reasonable
-cover what and why
-dont simply write “discuss with management”
-reasonableness can be confirmed through past trends, records, inquiry but need to incorporate planned changes
-third party correspondence
-post year end work where possible

Question 4

general procedures

Answer 4

-confirm assumptions are consistent with our knowledge and client environment
- sensitivity analysis, vary the key assumptions, assess impact of these variances on forecast
-get written representations from management confirming reasonableness of asusmptions and that all relevant info has been provided
-re cast to ensure arithmetical accuracy
-review outcome of previous forecasts and match to actual results
-assess competence and exp of person who prepared
-confirm consistency of the accounting policy used in preparing forecasts with those in last yrs FS

Question 5

critical evaluation of assurance report

Answer 5

-is addressee correct
-does report specify what forecats the assurance relates to??
-is period covered mentioned
-has a proper reference to the standards been made?