SAS No. 19 The Examination of Prospective Financial Information

Status

Issued by Auditing Standards Committee in Taiwan on 16 October, 1990.

Summary

Prospective financial information relates to events and actions that have not yet occurred and may not occur. While evidence may be available to support the assumptions on which the prospective financial information is based, such evidence is itself generally future oriented and, therefore, speculative in nature, as distinct from the evidence ordinarily available in the audit of historical financial information. The auditor is, therefore, not in a position to express an opinion as to whether the results shown in the prospective financial information will be achieved.

The auditor should obtain a sufficient level of knowledge of the business to be able to evaluate whether all significant assumptions required for the preparation of the prospective financial information have been identified.

The auditor should consider the extent to which reliance on the entity’s historical financial information is justified and the period of time covered by the prospective financial information.

When the auditor is assessing whether the client’s preparation and disclosure of prospective financial information is appropriate, the auditor should perform necessary procedures to determine:

• Whether the prospective financial information is properly prepared from management’s assumptions;
• Whether the calculation of all amounts on the prospective financial information is accurate;
• Whether the relationships among all assumptions are reasonable;
• Whether the prospective financial information is prepared on a consistent basis with historical financial statements, using appropriate accounting principles.
• Whether the presentation of the prospective financial information is in accordance with generally accepted accounting principles; and
• Whether all assumptions have been properly disclosed.

The auditor should obtain written representations from management regarding the intended use of the prospective financial information, the completeness of significant management assumptions and management’s acceptance of its responsibility for the prospective financial information.

Because of the nature of uncertainty, sensitivity, and correlation of the prospective financial information, the auditor shall not issue a qualified-style report for the examination.

When the auditor believes that the presentation and disclosure of the prospective financial information is not adequate, the auditor should issue an adverse-style report on the prospective financial information.

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 issue an adverse-style report on the prospective financial information. 　

When the examination is affected by conditions that preclude application of one or more procedures considered necessary in the circumstances, the auditor should issue a disclaimer-style report and describe the scope limitation in the report on the prospective financial information.

Effective date

This Statement is effective for audit of financial statements with fiscal years ending on or after 31 December, 1990.