AAA – Nov 2012 – L3 – SA – Q2 – Assurance Engagements

Identifying non-objectives in profit forecast investigations by auditors.

Question

Which of the following is NOT an objective of profit forecast investigation on which an opinion can be given?
A. Whether or not the profit forecast complies with the Generally Accepted Accounting Principles
B. As to whether the profit forecast has been prepared on the basis of the existing organization’s accounting policies
C. Whether or not the profit forecast has been prepared on the basis of management assumptions and judgment
D. On the reasonableness of the management assumptions and judgment of the profit forecast
E. As to whether the profit forecast agrees with the underlying records

Answer

A. Whether or not the profit forecast complies with the Generally Accepted Accounting Principles

Explanation:
This option is incorrect because the auditor’s objective in profit forecast investigations does not typically include compliance with Generally Accepted Accounting Principles (GAAP). The focus is more on whether the profit forecast aligns with the company’s policies, management’s assumptions, and if it agrees with underlying records.

Tags: Assurance, Compliance, GAAP, Profit Forecast, Regulatory Standards
Level: Level 3

Topic: Assurance Engagements
Series: NOV 2012

Uploader: Dotse