 Hello and welcome to the session. This is Professor Farhad in which we would look at two reports, one deals with the forecasted financial statement and one deal with projected financial statements. Both of these reports are under the prospective financial information, starting with the forecasted financial statements. So let's see what the report would look like because remember for a for a prospective financial information, we could have an examination and we could have an agreed upon procedures. I'm only going to show you the examination because we did cover agreed upon procedure much, much more in the details. Now, I also explained what is a forecast and what is projected financial statement. This is the final product. Looking at the final product will wrap everything up together. Once again, just like with all the attestation report, there is no standard format. However, the AI CPA will provide several examples. And what I did, I went to the AI CPA literature and I brought you some samples, but you can go to their website. You can Google it and find more samples yourself. The first, you have the title and it has to have the word independent in it because we are providing an assurance. We'll have to have who is the report address to the address C. And we have to start by saying we have examined. Notice here, examined the accompanying forecast. Examined is the highest level of assurance. It's just like the same thing as audit. The accompanying forecast of Adam company, which comprises the forecasted balance sheet, forecasted statement of income stockholders, equity and cash flow for this period. Based on the guidelines for the presentation established by the AI CPA, we have to mention this. Now, we also have to mention that Adam company is responsible for preparing and presenting the forecast according to the AI CPA. Our job, our responsibility, management responsibility is to prepare. Our responsibility is to express an opinion. Remember, with with examination comes an opinion, the highest level of assurance. In the next second paragraph, we talk a little bit more about our examination, a little bit more of details. How did we conduct the examination? Well, in accordance with the AI CPA, those standards require that we plan and perform the examination to obtain reasonable assurance. We have to mention the word reasonable assurance, whether the forecasts are presented in accordance with the guidelines established by the AI CPA and or material respect. Also, an examination involves performing procedures to obtain evidence. Remember, we are collecting evidence about the forecast. Nature, timing and extent of the procedure depend on our judgment, including our assessment of the risk of material in the statement, whether due to error or fraud. We also have to say we believe that the evidence we obtain is sufficient and appropriate. Very much like a traditional audit to provide a reasonable basis for our opinion because it's an examination. We have to have sufficient appropriate evidence every time we are dealing with an examination opinion and sufficient appropriate evidence. In our opinion, the accompanying forecast is presented in all material respect with the guidelines established by the AI CPA. That's it. It's a clean opinion. Now, we have to mention one additional paragraph and you have to be aware of it. You always have to mention two things in a projection as well as a forecast. There will usually be differences between the forecast because you are talking about the future and the actual result because events and circumstances frequently do not occur as expected. And these differences may be material. It's not only differences and they could be large. We don't know. Also, you have to mention we have no responsibility to update this report. Once again, this applies to forecast as well as projection. So this is the this is the examination of a forecast. Now, the next thing I'm going to look at is the examination of a projection. I'm only going to highlight the difference because they are practically the same, not practically the same. They are different. So I'm only going to highlight the differences. Before we proceed any further, I have a public announcement about my company, farhatlectures.com. Farhat Accounting Lectures is a supplemental educational tool that's going to help you with your CPA exam preparation as well as your accounting courses. My CPA material is aligned with your CPA review course such as Becker, Roger, Wiley, Gleam, Miles. My accounting courses are aligned with your accounting courses broken down by chapter and topics. My resources consist of lectures, multiple choice questions, true-false questions, as well as exercises. Go ahead, start your free trial today, no obligation, no credit card required. Again, independent, address C, that's obvious, the same thing. We followed the CPA. However, we examined, now we're talking about projected balance sheet. And once we have a projected balance sheet, we have to have hypothetical assumptions. That's why it's different. With a projected balance sheet, you have hypothetical assumptions. So let's take a look at what is the hypothetical assumption here. We have to examine the projection of Adam Company's balance sheet, statement of income stockholders equity cash flow based on the guidelines provided by the AI CPA. Adam Company is responsible for preparing, just like they are responsible for preparing the forecast and accordance with the AI CPA. The projection, notice here, was prepared for the purpose of negotiating a loan to expand Adam's plan. So notice the hypothetical assumption is there is a loan going on and the projection is taking that projection into consideration. So assuming the loan is accepted, our responsibility is to express also an opinion because this is an examination on the projection based on our examination. So notice the hypothetical assumption is we are getting a loan. We are getting a loan. Now we look at the examination. Once again, no difference between how we conducted the examination, whether it's a projection or a forecast, basically the same exact paragraph, same exact thing. Now we looked at the last three paragraphs and our opinion, now we are giving the opinion. Assuming the granting of the requested loan. So notice this is the hypothetical assumption for the purpose of expanding Adam plant, the projection referred to above as presented in all material respect in accordance with the AI CPA. Now we are saying, giving the assumption, everything is presented as it's supposed to be in all material respect. So notice here, there is an assumption being made and the underlying assumptions are suitable, supported and provide basis for the management. Projection given the hypothetical assumption. So given the hypothetical assumption, we are giving a clean opinion. We are giving a clean opinion. So that's the difference is you are mentioning that assumption. It's not only that, we have to mention, even if the loan is granted, simply put, even if the hypothetical scenario did materialize and the plant is expended, there will be usually differences between the projected and the actual results. Notice here, we're talking again about those potential differences. They could differ between the projected and the actual, just like they differ between the forecast and the actual. But here we have to mention the hypothetical assumption or assumptions, there could be more than one assumption. Also, we have to mention we have no responsibility to update this report, just like what we said in the prior report about the forecast, we have no responsibility. However, we're going to add one more paragraph and why? Because when we are dealing with projection, projection deals with hypothetical assumptions. Hypothetical assumptions are very limited to people, limited to the people who are using it. So therefore, the projection of the accompanying projection and this report are intended solely for the information and use of Adam Company and Bank of America and are not intended to be used by anyone else. So what we did is we limited, we restricted the report because this is a projection. The projection, the report is limited. Why? Because we are using hypothetical assumptions and anytime we use hypothetical assumptions, people, the general public don't understand. We have to limit the report, just like with the agreed upon procedures. Agreed upon procedures, it's agreed between, I'm going to say two parties. It could be more than two parties, but I'm saying two parties, basically between two parties. You have to agree with someone, could be three, four parties, but it's limited parties. Every time that, that report is limited, then you have to restrict the report, limit the report. What else you have to do? You have to have the signature block at the end. What should you do now? Go to Farhat Lectures and work MCQs to help you understand this concept better. Those are easy CPA exam. What we did is we wrap up everything that we learn about projection and forecast, which is under the what? Under the prospective financial information or the prospective financial statements. Good luck, study hard and stay safe.