- 20 Marks
AAA – May 2021 – L3 – Q2 – Audit of Prospective Financial Information
Considerations before accepting an engagement to review prospective financial information, recommended procedures, and unmodified report extract.
Question
You are a partner in an audit firm – Dogba & Associates. One of your prospective clients is Edith Enterprises Nigeria Limited, a manufacturer of steel rods. Edith Enterprises is a private company set up by Madam Edith Adagba in 1985. Madam Adagba has since retired and handed over the running of the company to her daughter, Hauwa. Hauwa is determined to expand the operations of the company and has decided to go to the capital market for financing.
Hauwa has contacted Dogba & Associates and requested that the firm should act as reporting accountants by reviewing and reporting on its prospective financial information which has been prepared as part of the offer.
The audit firm has asked that you handle the engagement. In preparing for the engagement, you are required to do the following:
(a) Explain the matters, as required by ISQC 1 and ISAE 3400, which you would consider before accepting the engagement to review and report on the client’s prospective financial information. (6 Marks)
(b) Assuming you choose to accept the engagement, recommend the examination procedures to be performed in respect of the review of the prospective profit or loss information. (9 Marks)
(c) Prepare an extract of an unmodified report that the auditor could issue on the prospective financial information. (5 Marks)
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