Financial forecasts and projections

Question 1

Know the two different types of prospective financial statements: forecasts and projections.

2. Know the three kinds of engagements (and the structure of the reports): examination, compilation, and agreed-upon procedures, associated with prospective financial statements.
3. Understand the “partial presentation” of a forecast based on the AICPA’s minimum presentation guidelines.

Answer 1

h

Question 2

two types of prospective forward looking financial informaiton

Answer 2

forecasts-represents the predicted outcome (best guess)

projections-represents the expected outcome based on certain specified hypothetical assumptions (what if)

Question 3

for prospective info a compilation is allowed but a ____is not

Answer 3

review

Question 4

responsibilities are to evaluate the presentation of such info and the _____ for reasonableness

Answer 4

underlying assumptions

the report structure is similar to an audit report

Question 5

only a forecast can have general distribution. a projections must

Answer 5

have limited distribution (must add an additional paragraph limiting distribution)

Question 6

compilation of prospective f/s

Answer 6

no assurance conveyed
read report and determine if it is consistent with aicpa guidelines
disclose major assumptions

Question 7

reporting usually 2 paragraphs

Answer 7

1. identify nature of engagement and prospective info

2. state compilation was limited in scope and disclaim opinion. accountant takes no responsibility after report date

Question 8

any report on partial projection should be

Answer 8

restricted