Prospective Financial Information

1 Introduction .01-.12

Structure of the Guide .06

Relationship to Other Literature .07-.12

2 Scope .01-.10

Presentations .01-.03

Practitioners’ Services .04-.10

3 Definitions .01-.14

4 Types of Prospective Financial Information and Their Uses .01-.09

5 Responsibility for Prospective Financial Information .01-.04

6 Preparation Guidelines .01-.51

7 Reasonably Objective Basis .01-.42

8 Presentation Guidelines .01-.72

Prospective Financial Statements .02-.56

Uses of Prospective Financial Statements .02-.03

Responsibility for Prospective Financial Statements .04-.05

Title .06-.07

Format .08-.12

Date .13

Accounting Principles and Policies .14-.19

Materiality .20

Presentation of Amounts .21-.24

Assumptions .25-.36

Period to Be Covered .37-.48

Distinguishing From Historical Financial Statements .49-.50

Correction and Updating of a Financial Forecast .51-.56

Partial Presentations .57-.72

Uses of Partial Presentations .59-.60

Preparation and Presentation of Partial Presentations .61-.72

9 Illustrative Prospective Financial Information .01-.08

10 Types of Practitioners’ Services .01-.39

Types of Services .03-.16

Responsibility for Prospective Financial Information .17

Reasonably Objective Basis for Presentation .18-.20

Quality Control .21-.26

Independence .27-.32

Change in Engagement to a Lower Level of Service .33-.37

A Practitioner’s Responsibility for Prospective Financial Information That Contains Disclosures About Periods Beyond the Prospective Period .38

Materiality .39

11 Preparation of Prospective Financial Information .01-.52

Introduction .01-.02

Applicability .03-.09

Independence .10-.11

Requirements .12-.51

General Principles for Performing Engagements to Prepare Prospective Financial Information .12-.13

Preconditions for Accepting an Engagement to Prepare Prospective Financial Information .14-.21

Agreement on Engagement Terms .22-.27

Knowledge and Understanding of the Entity’s Financial Reporting Framework .28-.32

Knowledge of Other Matters 33 Preparing the Prospective Financial Information .34-.40

Preparation of Prospective Financial Information That Contains a Known Departure or Departures from the AICPA Presentation Guidelines .41-.44

Preparation of Prospective Financial Information That Omits Substantially All Disclosures Required by the AICPA Presentation Guidelines .45-.46

Communication With the Responsible Party .47-.48

Documentation Requirements .49-.51

Appendix A—Illustrative Engagement Letters for a Preparation Engagement .52

12 Compilation Procedures .01-.37

Introduction .01-.03

Applicability .04-.05

Requirements .06-.32

General Principles for Performing and Reporting on Compilations of Prospective Financial Information .06-.07

Preconditions for Accepting a Compilation Engagement .08-.14

Agreement on Engagement Terms .15-.20

Knowledge and Understanding of the Presentation Guidelines and Underlying Accounting Principles Used by the Entity .21-.25

Knowledge of Other Matters .26

Reading the Prospective Financial Information .27

Other Compilation Procedures .28-.32

Documentation Requirements .33-.36

Appendix A—Illustrative Engagement Letters for a Compilation .37

13 The Practitioner’s Compilation Report .01-.31

Omission of Substantially All the Disclosures Required by the AICPA Presentation Guidelines .05-.07

Multiple Periods .08-.09

Lack of Independence .10-.12

Known Departures From the AICPA Presentation Guidelines .13-.19

Supplementary Information .20-.22

Alert That Restricts the Use of the Practitioner’s Compilation Report .23-.25

Emphasis-of-Matter or Other-Matter Paragraphs .26-.27

Reference to Historical Financial Statements .28

Reporting on a Financial Forecast That Includes a Projected Sale of an Entity’s Real Estate Investment at the End of the Forecast Period .29

Reporting If the Prospective Financial Information Includes Disclosures About Periods Beyond the Prospective Period .30-.31

14 Examination Procedures .01-.71

Engagement Acceptance .06-.11

Materiality .12

Training and Proficiency .13-.17

Requesting a Written Assertion .18-.19

Planning an Examination Engagement .20-.30

Engagement Understanding .20-.21

Engagement Strategy .22-.26

Assessing Risks of Material Misstatement .27-.30

Procedures to Evaluate Assumptions .31-.50

Development of Assumptions .31-.34

Evaluation of Assumptions .35-.37

Support for Assumptions .38-.50

Evaluating the Preparation and Presentation of Prospective Financial Information .51-.52

Written Representations .53-.56

Assumptions Dependent on the Actions of Users .57

Additional Considerations for Partial Presentations .58-.59

Other Information .60-.64

Illustrative Examination Procedures .65-.70

Appendix A—Illustrative Engagement and Representation Letters for an Examination .71

15 The Practitioner’s Examination Report .01-.27

Modifications to the Practitioner’s Opinion .09-.27

Additional Considerations for Partial Presentations .20-.21

Reporting on a Financial Forecast That Includes a Projected Sale of an Entity’s Real Estate Investment at the End of the Forecast Period .22

Reporting If the Prospective Financial Information Includes Disclosures About Periods Beyond the Prospective Period .23-.24

Reporting If the Examination Is Part of a Larger Engagement .25-.26

Lack of Independence .27

16 Application of Agreed-Upon Procedures .01-.34

Nature of an Agreed-Upon Procedures Engagement .04

Engagement Acceptance .05-.14

Change to an Agreed-Upon Procedures Engagement From Another Form of Engagement .10-.14

Written Assertion .15-.19

Procedures to Be Performed .20-.26

Use of Specialists and Internal Auditors .23-.26

Representation Letter .27-.30

Adding Parties as Specified Parties (Nonparticipant Parties) .31-.33

Appendix A—Illustrative Engagement and Representation Letters for Agreed-Upon Procedures Engagements .34

17 The Practitioner’s Report on the Results of Applying Agreed-Upon Procedures .01-.13

Findings .02-.07

Explanatory Language .08

Restrictions on the Performance of Procedures .09-.11

Responsible Party Refuses to Provide a Written Assertion .10-.11

Adding Nonparticipant Parties .12

Knowledge of Matters Outside Agreed-Upon Procedures .13

Appendix

A Overview of Statements on Quality Control Standards

B Schedule of Changes Made to the Text From the Previous Edition

Index of Pronouncements and Other Technical Guidance

Subject Index

Founded in 1887, the American Institute of Certified Public Accountants (AICPA) represents the CPA and accounting profession nationally and globally regarding rule-making and standard-setting, and serves as an advocate before legislative bodies, public interest groups and other professional organizations. The AICPA develops standards for audits of private companies and other services by CPAs; provides educational guidance materials to its members; develops and grades the Uniform CPA Examination; and monitors and enforces compliance with the accounting profession's technical and ethical standards.
The AICPA's founding established accountancy as a profession distinguished by rigorous educational requirements, high professional standards, a strict code of professional ethics, a licensing status and a commitment to serving the public interest.