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

CA Nandini is drafting her SAE 3400 report on a forecast of Lotus Pharma Ltd that is prepared solely for a lender. Which combination correctly describes content she must include?

Her report must refer to the purpose or restricted distribution when applicable and include appropriate caveats about the achievability of the results. It must also state that management is responsible for the information and its assumptions, and not the auditor, and it cannot offer an opinion that results will be achieved.

  1. AOpinion on whether the forecast will be achieved, and omission of any reference to management's responsibility
  2. BReference to restricted distribution when applicable, and caveats on achievability of the results indicatedCorrect
  3. COnly the date of signing and the audit fee, since the forecast is for a single user
  4. DA statement that the auditor, not management, is responsible for the underlying assumptions

Explanation

SAE 3400 requires the report to state that management is responsible for the information including assumptions, to refer to purpose or restricted distribution when applicable, and to include appropriate caveats on achievability. The first and fourth options reverse these requirements, and the third omits required elements.

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