“Which comes first?Which is of more importance than the other?What does each focus on?”
I can’t see why you would get excited about these as I hardly see any relevance to a P7 requirement.
Concentrate on those things that will give you a pass.

Hope this helps

All we are able to do really is confirm the reasonableness of the underlying assumptions and assure ourselves that they are realistic.

It’s often the case that a Cash Flow Forecast will show exactly what the preparer wants it to show …. and if it doesn’t, then the preparer will tweak it. The client is not going to show the bank / prospective lender a forecast which is gloomy and pessimistic so Cash Flow forecasts are most unlikely to present that picture.

It’s going to be bullish and smiley-faced and exciting and ( claimed to be ) realistic

The auditor will have to put on his cap / her hat of considerable professional scepticism

We can, in some cases, confirm that the first month or so of the forecast has actually happened, and we can confirm the opening receivables / payables to support the forecast flow from these bodies. We can also confirm the opening balance at the bank which is the start point.

Levels of sales and production can be seen to be (un) realistic given our knowledge of the history of sales and production capacity. Numbers of employees and wage rates can be re-computed and one off items like dividends and tax payments can be checked to see that they are included and reasonably calculated / forecast.

We can check to see that non-cash items like depreciation have not been included.

We should check the accuracy of the arithmetic

But, overall, it’s a check on the reasonableness of the assumptions used as well as the reason for the forecast, the target audience and, importantly, the integrity and historic success of the preparer in their previous forecasts

Kings and Queens ….. !!!
)

There, is that better?

Can you provide me the framework to verify the cash flow forecast ?
Thanks

Are you going to make me look this up in an approved text? Could you not find out the answer to this one on your own?

A2 – Two elements here! What on Earth are the directors doing creating a subsidiary just before the year end and conveniently forgetting it when asked to sign a “written representations” letter?

Secondly, I think that no matter the quantitative materiality of the new subsidiary, this looks like a situation where qualitative materiality comes in. IF ( and I emphasise IF ) the new subsidiary is merely a preparatory move in readiness for a new launch in some distant country and there have been NO transactions related to it, I suppose it can be ignored on the basis of materiality. However, per your post “and the auditor of the group(parent) comes to know this after the year end but before the audit report”, I think the auditor should be put on guard! What else has “accidentally” been omitted from the information given to the auditors? This now leads on to deeper issues like the reliability / honesty of the board. Do we really wish to continue working with / for an apparently reckless / dishonest board?

The difference is that “procedures” involves a verb to explain the procedures whereas “evidence” involves a noun to explain the evidence

Q2: a company(subsidiary) is incorporated before the year end and the auditor of the group(parent) comes to know this after the year end but before the audit report,,what are its report implications??please exlain it in terms of materiality,pervasiveness and the disclouses …………..waiting for your reply sir ….thanks