Prospective Financial Information Guide
Written by an expert author, this authoritative guide will assist practitioners with interpreting and applying the guidance related to prospective financial information, including the new SSAE No. 18, and SSARS 23.

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Product details

Who Will Benefit

  • Practitioners who work on preparation, compilation, examination or agreed-upon procedure engagements on prospective financial information.
  • B&I financial managers may use this guide to prepare prospective financial information or to prepare for compilation, examination, or agreed upon procedures engagements.
  • Individuals in business and industry, as well as public accounting, who prepare financial statements when applying the cash- or tax-basis of accounting.

Key Features

  • Provides updated illustrative engagement and representation letters and practitioner reports.
  • Discusses when independence is required and when a lack of independence may be allowed.

This new authoritative guide assists with interpreting and applying the guidance related to prospective financial information, including the new SSAE No. 18, Attestation Standards: Clarification and Recodification, and SSARS No. 23, Omnibus Statement on Standards for Accounting and Review Services—2016. Written by industry expert Don Pallais, CPA, this new resource provides interpretive guidance and implementation strategies for all preparation, compilation examination and agreed upon procedures on prospective financial information:

  • Helps with establishing proven best-practices.
  • Provides practical tools and resources to assist with compliance.
  • Exposes potential pitfalls associated with independence and ethics requirements.


  • SSAE No. 18
  • SSARS No. 23
  • Preparation and compilation engagements now fall under the SSARSs
  • The attestation engagements require an assertion from the responsible party
Content preview

First Except

Engagement Letter

The following is an excerpt from a sample engagement letter for a compilation of a financial forecast:

This letter sets forth our understanding of the terms and objectives of our engagement and the nature and limitations of the services we will provide.

We will compile, in accordance with attestation standards established by the American Institute of Certified Public Accountants, from information managementprovides, the forecasted balance sheet, statements of income, retained earnings, and cash flows, and summaries of significant assumptions and accounting policies of XYZ Company as of December 31, 20XX, and for the year then ending. A compilation is limited to presenting, in the form of a financial forecast, information that is the representation of management. We will not examine the financial forecast and therefore, will not express any form of assurance on the achievability of the forecast or the reasonableness of the underlying assumptions.

A compilation of a financial forecast involves assembling the forecast based on management's assumptions and performing certain other procedures with respect to the forecast without evaluating the support for, or expressing an opinion or any other form of assurance on, the assumptions underlying it.

If for any reason we are unable to complete our compilation of your financial forecast, we will not issue a report on it as a result of this engagement.

A financial forecast presents, to the best of management's knowledge and belief, the Company's expected financial position, results of operations, and cash flows for the forecast period. It is based on management's assumptions, reflecting conditions it expects to exist and the course of action it expects to take during the forecast period.
Management is responsible for representations about its plans and expectations and for disclosure of significant information that might affect the ultimate realization of the forecasted results.

There will usually be differences between the forecasted and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. Our report will contain a statement to that effect.

Second Excerpt

Reasonably Objective Basis

The responsible party has a reasonably objective basis to present a financial forecast if sufficiently objective assumptions can be developed for each key factor.   The following matters should be considered when evaluating whether such assumptions can be developed:

      • Can facts be obtained and informed judgments made about past and future events or circumstances in support of the underlying assumptions?
      • Are any of the significant assumptions so subjective that no reasonably objective basis could exist to present a financial forecast? (For example, the responsible party might not have a reasonably objective basis to present a forecast that includes royalty income from products not yet invented or revenue from a thoroughbred being reared to race. In such cases, it would be inappropriate to present a forecast because of the lack of a reasonably objective basis.)
      • Would people knowledgeable in the entity's business and industry select materially similar assumptions?
      • Is the length of the forecast period appropriate?

Other matters that responsible parties may consider when evaluating whether sufficiently objective assumptions can be developed are shown in exibith 7-1.

The evaluation of whether sufficiently objective assumptions can be developed for each key factor should be made within the following context:

      • A factor is evaluated by considering its significance to the entity's plans and the dollar magnitude and pervasiveness of the related assumption's potential effect on forecasted results (for example, whether assumptions developed would materially affect the amounts and presentation of numerous forecasted amounts).

        The responsible party's consideration of which key factors have the greatest potential impact on forecasted results is a matter of judgment and is influenced by the responsible party's perception of the needs of a reasonable person who will rely on the financial forecast. A key factor having the greatest potential impact on forecasted results is one in which omission or misstatement of the related assumption would probably, in light of surrounding circumstances, change or influence the judgment of a reasonable person relying on the financial forecast. (The more likely an assumption will have a significant impact on the overall forecasted results, and the more likely the factors that relate to the assumption indicate a less objective basis, the more likely a judgment should be made that there is no reasonably objective basis to present a financial forecast.)
      • The responsible party should seek out the best information that is available in order to develop the assumptions. Cost alone is an insufficient reason not to acquire needed information. However, the cost of incremental information should be commensurate with the anticipated benefit to be derived.
      • A conclusion that a reasonably objective basis exists for a forecast might be easier to support if the forecast were presented as a range.
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American Institute of CPAs

The American Institute of CPAs (AICPA) is the world’s largest member association representing the CPA profession, with more than 418,000 members in 143 countries, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting.

The AICPA sets ethical standards for the profession and U.S. auditing standards for private companies, nonprofit organizations, federal, state and local governments. It develops and grades the Uniform CPA Examination, and offers specialized credentials for qualified professionals who concentrate on personal financial planning; forensic accounting; business valuation; and information management and technology assurance. With The Chartered Institute of Management Accountants (CIMA), it offers the Chartered Global Management Accountant (CGMA) designation, which sets the global benchmark for quality and recognition in management accounting.

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