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Hello sir/ madam,
there is one significant assumption abt the PFI is unrealistic and auditor is unable to get sufficient evidence while management is ready to disclose this matter fully in the notes to the user.
so my question is what should we do, withdraw
adverse report
or
there is any third possibility for us to report?Do you disagree with the assumption? Or are you simply sceptical about its achievability
Your report on of is along the lines of “the information has been prepared in accordance with the assumptions stated”
If one of those assumptions were, for example, that revenue would increase 15 fold after each successive quarter for the next 30 years then clearly that would be unachievable and you probably wouldn’t wish to have your name and reputation put at risk by being associated with this company / these directors – withdraw from the assignment
If, on the other hand, the directors appear to be leaning towards optimism (revenue is assumed to double over the next 12 months) then you need to be persuaded by the directors that this is a reasonable, achievable target.
If they can’t persuade you, then probably withdraw unless you could persuade them to bring down this forecast growth to a level that you feel is realistic and achievable whilst still being optimistic.
Basically, play it by ear – discuss, negotiate and compromise
Ok?
thanks for ur response,
actually in the case mgt has assumed the tax outflow will be significantly reduced due the Industrial Zone area. mgt says that they are disclosing this matter to the specified user for whom PFI ie prepared. so we have only two options
withdraw
or
adverse opinionor there is any third option to report like Except For or EOMP here?
There is a third possibility! Have the client prepare TWO sets of pfi. The first to reflect the figures where the Zone goes ahead and the second where the Zone does not go ahead.
In fact there are two other possibilities!
Let the client prepare the figures on the basis that the Zone does go ahead but require the client to include a note explaining the situation, and, better than that,
get the client to prepare on the basis that the Zone does not go ahead but include a note explaining how things could change
This surely is not a matter for a disagreement – it’s what used to be called an uncertainty (now refers to as a lack of available (audit) evidence)
If you accept that, then a pervasive report would involve a disclaimer and that would be of absolutely no use at all to the client
I believe that what you are facing is making a comment on the pfi that clearly indicates the situation – with the Zone / without the Zone – your report can still be made “based on the stated assumptions” but there must be total clarity in the users’ minds about the affect of Zone / no Zone
What does the reporting partner think – that’s where the buck stops!
Can you let me have the name and address that I should send the Opentuition invoice to?
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