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CA Final · Advanced Auditing, Assurance and Professional Ethics · Prospective Financial Information and Other Assurance Services

CA Imran has prepared a SAE 3402 assurance report on the system of Deccan Data Hosting Ltd. The management asks whether the report may be freely given to prospective customers who have no understanding of how the system is used in financial reporting. What is the correct position under SAE 3402?

The report states that its criteria are relevant only to those who understand how the system is used in user entities' financial reporting, and the service auditor may add wording restricting distribution to intended users and limiting other use. Unrestricted circulation to uninformed prospects is therefore inappropriate.

  1. AThe report can be freely distributed because assurance reports are public documents
  2. BThe criteria are relevant only to those who understand how the system is used for financial reporting by user entities, so this is stated in the report and the auditor may add wording restricting distribution and useCorrect
  3. CThe report must always be restricted by law to the board of directors alone
  4. DRestriction is prohibited, as it would amount to a modification of opinion

Explanation

SAE 3402 explains that the criteria are relevant only to those who understand how the system has been used for financial reporting by user entities, and the report says so. The service auditor may also add wording restricting distribution to intended users or limiting use for other purposes. Restricting use is not an opinion modification.

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