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

CA Iyer is drafting a report on an examination of a projection prepared by Kaveri Pharma Ltd for a bank. Which combination of statements must the report contain under SAE 3400?

The report must state that management is responsible for the prospective information including its assumptions, give negative assurance on whether the assumptions provide a reasonable basis, and include caveats on whether the results can be achieved. It also gives an opinion on proper preparation.

  1. AA statement that the auditor is responsible for the assumptions, and a positive opinion that the results will be achieved
  2. BOnly an opinion on the arithmetical accuracy, with no reference to the assumptions
  3. CA statement that management is responsible for the prospective financial information including the assumptions, a negative assurance on whether the assumptions provide a reasonable basis, and appropriate caveats on the achievability of resultsCorrect
  4. DA statement of positive assurance on the assumptions, and a date that is the date of the board meeting approving the projection

Explanation

SAE 3400 requires the report to state management's responsibility for the information and assumptions, give negative assurance on the assumptions, give an opinion on proper preparation, and include caveats about achievability. Option A shifts responsibility to the auditor and promises results, which is wrong.

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