29. Such a report would: State whether, based on the examination of the evidence supporting the assumptions, anything has come to the auditor’s attention, which causes the auditor to believe that the assumptions do not provide a reasonable basis for the prospective financial information. Express an opinion as to whether the prospective financial information is properly prepared on the basis of the assumptions and is presented in accordance with the relevant financial reporting framework. State that: Actual results are likely to be different from the prospective financial information since anticipated events frequently do not occur as expected and the variation could be material. Likewise, when the prospective financial information is expressed as a range, it would be stated that there can be no assurance that actual results will fall within the range; and In the case of a projection, the prospective financial information has been prepared for (intended use), using a set of assumptions that include hypothetical assumptions about future events and management’s actions that are not necessarily expected to occur.
Consequently, readers are cautioned that the prospective financial
information should not be used for purposes other than the abovementioned intended use.
30. The following is an example of an extract from an unmodified report on a projection:
We have examined the projection of _____________ (project)__________
(name of the entity) for the period from _______ to ______ as given in4 ____ to the Prospective Financial Information from page __to ___in accordance with Standard on Assurance Engagement 3400, “The Examination of Prospective Financial Information”, issued by the Institute of Chartered Accountants of India. The preparation and presentation of the projection including the underlying assumptions, set out in note ____ to ______ to the prospective financial information, is the responsibility of the Management and has been approved by the Board of Directors5 of the company. Our responsibility is to examine the evidence supporting the assumptions (excluding the hypothetical assumption) and other information in the prospective financial information. Our responsibility does not include verification of the accuracy of the projections. Therefore, we do not vouch for the accuracy of the same. 4 Provide suitable identification, such as by reference to page numbers or by identifying the individual schedule. 5 Other corresponding approving authority in the case of entities other than companies. This projection has been prepared for (describe purpose). As the entity is in a start-up phase the projection has been prepared using a set of assumptions that include hypothetical assumptions about future events and management’s actions that are not necessarily expected to occur.
Consequently, readers are cautioned that this projection may not be
appropriate for purposes other than that described above.
We have carried out our examination of the prospective financial
information on a test basis. Based on our examination of the evidence supporting the assumptions, nothing has come to our attention which causes us to believe that these assumptions do not provide a reasonable basis for the projection, assuming that ________________ (state or refer to the hypothetical assumptions). Further, in our opinion the projection is properly prepared on the basis of the assumptions as set out in Note _____ to the Prospective Financial Information and on a consistent basis in accordance with the historical financial statements, using appropriate accounting principles. Even if the events anticipated under the hypothetical assumptions described above occur, actual results are still likely to be different from the projection since other anticipated events frequently do not occur as expected and the variation may be material. A complete illustrative format of an unmodified report on a projection is given in Appendix 1.
31. The following is an example of an extract from an unmodified report on a forecast:
We have examined the forecast of ____________________ (project) of the
______________________ (name of the entity) for the period from ___________ to ___________ in accordance with the Standard on
Assurance Engagements (SAE) 3400, “The Examination of Prospective
Financial Information”, issued by the Institute of Chartered Accountants of
India. The preparation and presentation of the forecast including the
underlying assumptions, set out in Note _____ to the Prospective Financial Information is the responsibility of the management and has been approved by the Board of Directors of the Company. The sources of information are set out in Annexure ______ to the prospective financial information. Our responsibility is to examine the evidence supporting the forecast. Our responsibility does not include verification of the accuracy of the forecasts. Therefore, we do not vouch for the accuracy of the same.
Based on our examination of the evidence supporting the
assumptions, nothing has come to our attention which causes us to believe that these assumptions do not provide a reasonable basis for the forecast. Further, in our opinion the forecast is properly prepared on the basis of the assumptions as set out in Note ____ and on consistent basis with historical financial statements, using appropriate accounting principles. Actual results are likely to be different from the forecast since anticipated events frequently do not occur as expected and the variation may be material. A complete illustrative format of an unmodified report on a forecast is given in Appendix 2.
32. When the auditor believes that the presentation and disclosure of the prospective financial information is not adequate, the auditor should express a qualified or adverse opinion in the report on the prospective financial information, or withdraw from the engagement as appropriate. An example would be where financial information fails to disclose adequately the consequences of any assumptions, which are highly sensitive.
33. When the auditor believes that one or more significant assumptions do not provide a reasonable basis for the prospective financial information prepared on the basis of best-estimate assumptions or that one or more significant assumptions do not provide a reasonable basis for the prospective financial information given the hypothetical assumptions, the auditor should either express an adverse opinion setting out the reasons in the report on the prospective financial information, or withdraw from the engagement.
34. When the examination is affected by conditions that preclude application of one or more procedures considered necessary in the circumstances, the auditor should either withdraw from the engagement or disclaim the opinion and describe the scope limitation in the report on the prospective financial information.
35. This SAE is effective in relation to reports on projections/forecasts, issued on or after April 1, 2007. However, earlier application of the Standard is encouraged.
Compatibility with International Standard on Assurance
Except for the matters noted below, the basic principles and essential procedures of this SAE and International Standard on Assurance Engagement
(ISAE)3400 “The Examination of Prospective Financial Information”, are consistent in all material respects:
