Prospective Financial Information Flashcards
What are prospective financial information?
Forward looking information
What type of engagements does a prospective financial information apply to?
1) Examination
2) Agreed upon procedures
REVIEWS ARE PROHIBITED!!!!!!!!!
What are the two types of prospective financial information?
1) Financial FORECAST
2) Financial PROJECTIONS
What is a financial forecast?
Prospective financial statement that present an EXPECTED financial position.
Based on assumptions and conditions that it EXPECTS
What is a financial projections?
Prospective financial statements that present statements based of HYPOTHETICAL ASSUMPTIONS
Present one or more HYPOTHETICAL COURSES OF ACTIONS FOR EVALUATION
“What would happen IF……”
What written representations are expected for a forecast?
1) Forecast presents the expected financial statements and reflects expected conditions
2) Underlying assumptions are reasonable and suitably supported
3) The range was not selected in misleading manner (when the forecast is expressed as a range)
What written representations are expected for a projections?
1) Identify the hypothetical assumptions; and identify any that are considered “improbable”
2) Describe the limitations of the usefulness of the presentation
3) That the projection presents the expected financial information and reflects expected conditions and the hypothetical events
4) Underlying assumptions (excluding the hypothetical ones) are reasonable and suitably supported
5) That the range was not selected in a misleading manner, if the projection is expressed as a range
If refusal to provide written representation (by an party either responsible or not) what should happen?
Withdrawal!! NO EXCEPTION ON THIS!!
What is the difference between general versus limited use reports?
Limited= Restricted distribution
Only an examination report on a forecast is appropriate for general use!!
Examination of projection, there HAS TO BE RESTRICTION!!!
When would you issue an adverse opinion?
If the prospective financial information fails to disclose ANY “significant assumptions” or they DO NOT PROVIDE a reasonable basis for the forecast or projection
