Page 14 - CA Inter Audit PARAM

CA Ravi Taori
QNO— Review Report New Course – (SM25 / M24M)
SAINTRO.10 Bhaskar CNO - SAINTRO.64
The management of Exotic Tours and Travels Limited requests its auditor Raja & Co to provide an
assurance report on the financial information for first quarter of a year by skipping required detailed
procedures.

Can Raja & Co. provide such a report? What would be nature of such a report? Would it be necessary for
them to obtain sufficient appropriate evidence in such a case?
or
KST Limited is engaged in manufacturing business. It appoints CA T to provide it an assurance report on
its financial statements prepared on the basis of historical financial information. The characteristic of
such an engagement is that it involves gathering of sufficient appropriate evidence on basis of which
limited conclusions can be drawn up by practitioner. Identify type of engagement. Which are two other
features of such an engagement?
Answer Audit vs Review.
We have learnt that audit is a reasonable assurance engagement. It provides reasonable assurance.
However, review is a limited assurance engagement. It provides lower level of assurance than audit.
Further, review involves fewer procedures and gathers sufficient appropriate evidence on the basis of
which limited conclusions can be drawn up. However, both "audit" and "review" are related to financial
statements prepared on the basis of historical financial information.

Nature of Assurance & Report
Raja & Co, as auditors, can provide an assurance report on the financial information for Exotic Tours and
Travels Limited for the first quarter of the year, but with certain caveats. The nature of this report would
be a "review" rather than a full audit.

Sufficient & Appropriate Evidence
Even in a review, Raja & Co would still be required to obtain sufficient appropriate evidence to support
their report. This involves inquiry and analytical procedures to assess the financial information presented
by the company.

QNO-- Identify Standards & Historical vs Prospective New Course – (J25M)
SAINTRO.20 Bhaskar CNO - SAINTRO.66

Rajul Ltd. engaged an external practitioner CA Rajul to provide assurance on its prospective financial
information for the upcoming year, which includes projections for a new product line. The company
projected a 15% increase in revenue, estimating total sales of ₹ 75 crore, driven by the expected launch

of this new product. Mention the applicable Engagement and Quality Control Standard and the level of
assurance that will be provided in the given situation. Also explain how Prospective Financial
Information is different from Historical Financial Information.
Answer In the given situation, Standards on Assurance Engagements will be applicable and such type of assurance
engagement provides only a “moderate” level of assurance.

In assurance reports involving prospective financial information, the practitioner obtains sufficient
appropriate evidence to the effect that management’s assumptions on which the prospective financial
information is based are not unreasonable, the prospective financial information is properly prepared on
the basis of the assumptions and it is properly presented and all material assumptions are adequately
disclosed.

“Historical financial information” and “Prospective financial information.” The former relates to
information expressed in financial terms of an entity about economic events, conditions or circumstances
occurring in past periods. The latter relates to financial information based on assumptions about
occurrence of future events and possible actions by an entity. Therefore, historical financial information is
rooted in past events which have already occurred whereas prospective financial information is related to
future events

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