Acca aaa s21 Notes

September 2021 to June 2022 exams
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As the budget stands there is a forecast balance of $10,920,000 at the end of the three year period. 
That would be enough to cover the loan - not accounting for interest.
An exam question might also require you to explain the matters you should consider before agreeing 
to an engagement. For this example, we should perhaps be a little suspicious that we have been 
asked to do this work, yet we are not the company’s auditors. It would be normal to ask the auditors 
to carry out these types of assurance engagement because, as they are normally required urgently, 
auditors can complete the work efficiently because of their client knowledge. Of course, the auditors 
might not have had time or resources to produce a report quickly, but we should be on our guard that 
we have been approached because we do not have detailed knowledge about Clairvoy Co and that 
makes it easier for the company to mislead us.
7. Before starting the work
The duties of an auditor are well-defined in both statute and auditing standards. For example, statute 
gives the auditors a right to see any documents they wish and to ask for all explanations they require. 
But, of course, auditors are careful to send an engagement letters to each client, a copy of which has 
to be signed and returned. The engagement letter sets out the work that will be performed by the 
auditor and the responsibilities and duties of the client.
Non-audit work, however, is not well-defined. Each job is unique and it is essential that it is well-
defined. For example, in the case of Clairvoy Co, it would be essential for the accountant to:
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Tell the client that the assurance will be limited (negative) not reasonable (positive).
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Confirm how many years or months the forecast covers (obviously, the longer the period, the 
greater the amount of work). Also the nature of assumptions (best-estimate of hypothetical).
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Find out the purpose of the cash flow forecast and who will receive it. The wider its use or 
distribution the greater the risk to the accountant.
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Agree with the client that the required information and source data will be made available.
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Agree a fee.
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Agree a deadline
As noted earlier, before agreeing to perform the detailed work, the accountant should initially review 
the cash flow forecast and assumptions to ensure that the information does not appear inappropriate 
for its intended use or that the assumptions are not clearly unrealistic.