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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Reporting on other assignments

Marlow & Co is engaged to examine a forecast prepared by the management of Tavira Ltd, a client seeking a bank loan. The forecast includes cash flow projections for the next three years. Under ISAE 3400, what is the primary conclusion the practitioner is able to express about the assumptions?

The practitioner states that nothing has come to their attention suggesting the assumptions fail to provide a reasonable basis for the forecast. They cannot guarantee the forecast will be achieved, because prospective information depends on uncertain future events and management's assumptions.

  1. AThat the forecast will be achieved in the amounts shown
  2. BThat nothing has come to the practitioner's attention to suggest the assumptions do not provide a reasonable basis for the forecastCorrect
  3. CThat the assumptions are the best that management could have chosen
  4. DThat the historical financial statements are free from material misstatement

Explanation

ISAE 3400 permits a negative-assurance style conclusion on whether the assumptions provide a reasonable basis for the prospective financial information. The practitioner cannot vouch that results will be achieved because future events are uncertain. Option A is wrong for that reason.

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