AA - Chapter 12 - Other assurance engagements

What should be considered before accepting an other assurance engagement?

P - Previous auditor

R - Risk order

I - Integrity (of management)

O - Other (e.g. money laundering)

R - Resources

What is the cash flow forecast an indicator of?

the company’s ability to meet interest and capital payments to the lender over the term of the loan

What do potential lenders will expect financial forecasts to contain?

a profit forecast, cash flow forecast, and forecast statement of financial position

Who is responsible for regarding preparing financial forecasts?

Management is responsible for preparing the prospective financial information

Who is responsible for regarding providing assurance on financial forecasts?

The assurance provider is responsible for reaching a conclusion on whether:

• the assumptions are reasonable

• the prospective financial information is prepared on a consistent basis with these assumptions.

What are the relevant procedures for financial forecasts?

1. consider management’s competence regarding the preparation of the forecasts (check last few forecasts)

2. assess the reasonableness of the assumptions made (ask management for estimate)

3. check the forecasts have been prepared on the basis of these assumptions

4. check mathematical accuracy

5. seek written representations from management regarding:

   – the intended use of the prospective financial information

   – the completeness of management assumptions

   – management’s acceptance of its responsibility for the prospective financial information

6. if any of the period of the forecast has already elapsed, compare to historic information

How many opinions does prospective financial information give?

2 opinions (only PFI)

What opinion is issued for limitation of scope?

Disclaimer of opinion/conclusion

What opinion is given if presentation and disclosure of the prospective financial information is not adequate?

Qualified or adverse opinion/conclusion

What opinion is given if one or more significant assumptions do not provide a reasonable basis for the prospective financial information?

Adverse opinion/conclusion

When may assurance conclusions need to be modified ?

if the practitioner is unable to say that ‘nothing has come to our attention

Who is responsible for preparing historic financial information?

Management is responsible for the preparation of the financial information in accordance with the relevant reporting framework.

Who is responsible for providing assurance on historic financial information?

The assurance provider is responsible for reaching a conclusion on whether anything has come to their attention to suggest that the financial information does not give a true and fair view and consider if the financial statements (as a whole) are free from material misstatement.

What are procedures for historic financial information likely to be limited to?

Procedures are likely to be limited to:

• enquiries of management and others within the entity

• analytical procedures

• obtaining written representations from management.

Which companies are required to make a disclosure of greenhouse gas emissions?

Companies listed on the main market of the London Stock Exchange

Other companies may choose to make such disclosures

What are the 2 assurance levels for assurance engagements on greenhouse gas (GHG) statements?

1. reasonable - an opinion on whether the GHG Statement has been prepared in accordance with the acceptable criteria.

2. limited – a conclusion on whether anything has come to the practitioner’s attention to indicate that the GHG Statement has not been prepared in accordance with the acceptable criteria.