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

While examining a five-year projection of Zenith Pharma Ltd, CA Arjun finds that management's assumptions do not provide a reasonable basis for the projection. Which of the following is the report element that SAE 3400 requires regarding assumptions?

The report must contain a statement of negative assurance on whether the assumptions provide a reasonable basis for the prospective financial information. SAE 3400 also requires an opinion on proper preparation and caveats on achievability, but not positive assurance or any guarantee of results.

  1. AA statement of positive assurance that assumptions are free of misstatement
  2. BA guarantee that the projected results will be achieved
  3. CA statement of negative assurance as to whether the assumptions provide a reasonable basis for the prospective financial informationCorrect
  4. DNo reference to assumptions, since only arithmetic is examined

Explanation

SAE 3400 report content includes a statement of negative assurance as to whether the assumptions provide a reasonable basis, an opinion on proper preparation on the basis of assumptions, and caveats on achievability. Positive assurance on assumptions is not provided and results cannot be guaranteed.

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