Prospective

ISAE
Financial
3400 Information

Energy
Crises
LNG
Import
Workings

What if we import LNG, then what will be

our:
• Purchase
• Sales
• Finance
• Fixed Assets
• Capital Expenditure
 Prospective
ISAE
Financial
3400 Information

New Plant

300 Million

Ban
k
3 to 5
years f/s

Projections
Forecast
 Prospective
ISAE
Financial
3400 Information

Firm Meeting

Decision making of hiring

40, 50, 80, 100
employees
• Pay Royalty
• Microsoft Favourable position
License or Unfavourable
• Infrastructure position

3.5 years
Cost Engagements
Junior Incurred
Employee

PROSPECTIVE FINANCIAL INTERNATIONAL STANDARDS ON

INFORMATION ASSURANCE ENGAGEMENTS
3400
 Prospective
ISAE
Financial
3400 Information

Financial Information

Complete set of general purpose

f/s
100-720

Complete set of special purpose f/s

ISA 800

Specific or single element audit

ISA 805

Engagement to report
and summarised f/s
audit
ISA 810
 Prospective
ISAE
Financial
3400 Information

Historical Financial
Information
12 Month 6 Month

Audit Review Audit Review

ISRE ISRE 2410

2400
F/S

Audit Review

PFI ISAE
3400
 Acceptance of Engagement • Source and reliability of evidence supporting best estimate assumption
• Intended use of information could
be obtained from internal and external source including historical
• General or limited distribution information
and whether within entity’s
Prospective
ISAE • Nature of assumption - BE or capacity.
• When Hypothetical assumptions - significant implication of such
Financial • HA
Elements to be included in the assumptions
3400 Information
for eg. Sales are assumed to grow beyond current capacity, increase
• PFI
Period covered (if loan period is 3yr Projections should be of 3yr) in
investment in
Should not accept or withraw plant.
• Although evidence supporting HA need not be obtained, but it should
when
assumptions are clearly be
Objectives examine and report on consistent with purpose and should not be
unrealistic
or when PFI will be inappropriate for unrealistic.
• Ensure
PFI PFI is prepared from management assumptions , by recomputation
its
intended
and
reviewing internal consistency (same interest rate are
What is Prospective Financial Information The
use above points should be the content of
In
EL addition include management used).on those areas that are sensitive to variation therefore
• focus
responsibility
for assumption and providing information ensure
appropriate evidence and adequacy of
FI based on assumptions about events to
Auditor. disclosures.
• Interrelationship of FS (BS, P&L,
that may occur in the future and possible • CF)
Procedure on elapsed period on
Knowledge of the • PFI
Obtain WR from Management - intended use, completeness of
action
by the entity, PFI can be forecast or
•Business
Sufficient level of knowledge to assumptions and management responsibility for PFI
projection.
Forecast evaluate
whether all significant assumptions
Future events which management expect have
been Presentation and
to
take place, and actions management identified
• Familiar Disclosure BE = Best Estimate
with the entity’s process for preparing • Presentation of PFI is informative not
expect
to take as at the date of financial PFI Internal control, expertise and misleading HA = Hypothetical
information,
It is also called best estimate experience
of the person, Nature of the • Accounting policies are cleary Assumption
assumption. documentation supporting management disclosed
• Assumptions are
Projections assumptions, Extent to which techniques adequately
disclosed in
HA about future events and are usedand
develop to apply PFI
• Bifurcated into best estimate
management
action which are not necessarily expected assumptions
• whether PFI is prepared on a basis and
Hypothetical
to
take place “What if” of
Historical • Areas that are subject to high degree
scenario. FI
• Also consider whether any modified of
uncertainity , those uncertainity
Could be for internal use and
Purpose of opinion
on resulting sensitivity needs to be
and
external
PFI FS disclosed
• Any change in accounting policy
use
The auditor shall obtain SAAE as to from
Historical FS need to be dislosed
Examination procedures
•whether
Best estimate assumption are along
with the reason and its effect on
• reasonable
Hypothetical assumption are consistent with purpose of PFI
PFI are prepared on the basis of assumption
• PFI Determing nature, timing and extent of procedures depend
on :
• likelihood of
• PFI is properly presented and all material assumption
MM
• knowledge obtained during previous
are adequately disclosed including whether they are BE or engagments
• Management
HA • competence
adequacy and reliability of underlying
• Consistent with historic FS using appropriate • data
Extent to which PFI is affected by management
accounting principles judgement
 The following is an example of an extract from Modification
unmodified report on a
an • When presentation and disclosure of PFI is
We have examined the forecast in accordance with
forecast: not
adequate - qualified or adverse or withdraw
Prospective
ISAE the
International Standard on Assurance Engagements applicable Eg:
when PFI fails to disclose
Financial to examination of prospective financial
the
3400 Information information.
Management is responsible for the forecast including
adequately
consequences of assumption which
are
highly
the
assumptions set out in Note X on which it is sensitive.
• When one or more Significant assumptions
Report on Examination of based.on our examination of the evidence supporting
Based do
not provide a reasonable basis for PFI -
the
assumptions, nothing has come to our attention which causes adverse
or
PFI
The report by an auditor on an examination us believe that these assumptions do not provide a
to withdraw.
• Scope limitation - Disclaimer or
prospective financial information should
of reasonable
basis for the forecast. Further, in our opinion the forecast withdraw.
is
properly prepared on the basis of the assumptions and Auditors
the
contain
is
presented in accordance •Assurance
following: with results are likely to be different from the forecast
It relates to events not yet occurred or may
Actual not
occurre
Addressee;
• Title;
since
anticipated events frequently do not occur as • d
Highly speculative in
• Identification of the prospective financial
expected
and the variation may be • nature
Therefore auditor is not in a position to
information;
• A reference to the ISAE or relevant national standards material. express
an opinion that results shown in the PFI will
or
practices applicable to the examination of The following is an example of an extract from be
achieved
prospective
financial unmodified report on a
an • Moderate level of assurance on
information;
• A statement that management is responsible for projection:
We have examined the projection in accordance with reasonableness
of management
the
prospective financial information including the
International Standard on Assurance Engagements • assumptions
However when appropriate level of
the
assumptions on which it is applicable
to the examination of prospective financial satisfaction
obtained - can give positive assurance
based;applicable, a reference to the purpose
• When information.
Management is responsible for the projection including opinion
and/or the
assumptions set out in Note X on which it is
restricted distribution of the prospective This projection has been prepared for (describe purpose). As
based.
financial
information; the
entity is in a start-up phase the projection has been
• A statement of negative assurance as to whether prepared
using a set of assumptions that include hypothetical
the
assumptions provide a reasonable basis for assumptions
about future events and management’s actions that are
the
prospective financial not
necessarily expected to occur. Consequently, readers
information;
• An opinion as to whether the prospective are
cautioned that this projection may not be appropriate
financial
information is properly prepared on the basis of for
purposes other than that described
the Based
above.on our examination of the evidence supporting
assumptions and is presented in accordance
the
assumptions, nothing has come to our attention which causes
withrelevant financial reporting
the us believe that these assumptions do not provide a
to
framework; caveats concerning the
• Appropriate reasonable
basis for the projection, assuming that (state or refer to
achievability
of the results indicated by the prospective the
hypothetical assumptions). Further, in our opinion the
financial
information; projection
is properly prepared on the basis of the assumptions
• Date of the report which should be the date and
is presented in accordance
procedures
have been with if the events anticipated under the hypothetical
Even
completed;
• Auditor’s address; assumptions
described above occur, actual results are still likely to be
and different
from the projection since other anticipated events frequently
• Signature. do
not occur as expected and the variation may be