Chapter 13

Question 1

two types of prospective financial information

Answer 1

forecast & projection

Question 2

what is forecast prospective financial information

Answer 2

prospective financial information based on assumptions as to future events which management expects to take place and the actions management expects to take

Question 3

what is projection - prospective financial information

Answer 3

prospective financial information based on hypothetical assumptions about future events and management actions, or a mixture of best estimates and hypothetical assumptions

Question 4

what is a hypothetical illustration

Answer 4

prospective financial information based on assumptions about uncertain future events and management actions which have not yet been decided upon

Question 5

what is a target

Answer 5

prospective financial information based on assumptions about the future performance of the entity

Question 6

5 things to consider before accepting a PFI engagement

Answer 6

intended use of info - internal or external
whether the info is for general or limited distribution
nature of assumptions
info to be included
period covered by the info

Question 7

why must PFI engagements only be a limited level of assurance

Answer 7

likely to have insufficient evidence to support assumptions made

Question 8

what negative assurance will audit provide on PFI

Answer 8

“nothing has come to our attention”

Question 9

why would an auditor express a qualified opinion

Answer 9

presentation and disclosure of PFI is not adequate

one or more assumptions are not reasonable

Question 10

what must auditors obtain sufficient appropriate evidence for, for a PFI engagement

Answer 10

managements assumptions are reasonable
info is properly prepared
info is properly presented and adequate disclosures
PFI is consistent with FS