Acca aaa s21 Notes

2. Positive or negative assurance?
It should be obvious that it is not possible to express positive (reasonable) assurance that there are no 
material errors in the financial information that is subject to the report. It would be a foolhardy 
accountant would would be willing to say that about any budget or projection. The future is simply 
too uncertain and the forecast subject to many assumptions.
The best that the accountant can provide is negative (limited) assurance. This simply states that 
nothing suggests that the 
assumptions
are unreasonable (as a basis for the PFI) and that the PFI has 
been 
properly prepared
based on those assumptions. The report will also include: 
๏
the basis of the accountant's examination (eg in accordance with ISAE 3400)
๏
the purpose of the PFI (and a caveat that it may not be appropriate for any other purpose)
๏
management's responsibilities (for the PFI and assumptions)
๏
a caveat that actual results may materially differ from the PFI.
September 2021 to June 2022 exams
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3. Acceptance of engagement
An accountant should 
not 
accept or withdraw from an engagement if assumptions are clearly 
unrealistic or results not suitable for intended use. For example, a budget showing sales and profits 
doubling without any convincing reason has probably been drawn up based on assumptions that 
give the answer required (eg cashflows sufficient to stay within an agreed overdraft limit). Similarly, if 
finance were being requested to support the opening of an additional shop, the budget for that 
shop’s results might be reasonable and show a profit, but if the rest of the business were in financial 
difficulties, presenting a cash flow for the only viable part of the business would not really be suitable 
for a supplier of loan finance.