When a practitioner examines projected financial statements,the practitioner's report should include a separate paragraph that:
A)Describes the limitations on the usefulness of the presentation.
B)Provides an explanation of the differences between an examination and a review.
C)States that the accountant is responsible for events and circumstances for a period not exceeding one year after the report's date.
D)Disclaims an opinion on whether the assumptions provide a reasonable basis for the projection.

Question

Quizplus · Accepted Answer

A separate paragraph is required to describe the limitations on the usefulness of the projected financial statements. This is because projections are based on assumptions, which may not necessarily reflect the actual future results. The purpose of this paragraph is to inform users of the limitations of the projections and to help them interpret the financial information presented. Thus, option A is the correct answer.

Option B is incorrect because it is not relevant to the report on projected financial statements. A review report, which explains the differences between review and examination, is required for a review engagement.

Option C is incorrect because it is not applicable to the preparation or examination of projected financial statements. The accountant's responsibility for events and circumstances is typically limited to the period covered by the financial statements.

Option D is incorrect because a practitioner's report on projected financial statements must provide an opinion on whether the assumptions used to prepare the projections provide a reasonable basis for the projections. A disclaimer of opinion would only be used when the practitioner cannot obtain sufficient evidence to support an opinion or when the conclusion is based on a scope limitation.

When a Practitioner Examines Projected Financial Statements,the Practitioner's Report Should