(c) Smart Technology Ltd. plans to issue a prospectus to raise capital through a public offering. Smart Technology Ltd. acquired Cloud Computing…

CA Final · Advanced Auditing, Assurance and Professional Ethics · PYQS · May 2025
(c) Smart Technology Ltd. plans to issue a prospectus to raise capital through a public offering. Smart Technology Ltd. acquired Cloud Computing Ltd., a leader in cloud advisory services, to strengthen its capabilities in providing cloud solutions and this acquisition aligned for a digital transformation strategy. The prospectus includes pro forma financial information to demonstrate the financial effects of a significant acquisition completed recently. As the engagement practitioner, you are entrusted with providing an assurance report on the compilation of this pro forma financial information in accordance with relevant Standard on Assurance Engagement. Smart Technology Ltd.'s management has provided the following details: (1) The source of the unadjusted financial information includes unaudited financial statements for a subsidiary acquired during the year. (2) Pro forma adjustments which include Fair value adjustments for acquired assets and liabilities. (3) The applicable financial reporting framework is IFRS, with modifications specific to the jurisdiction of operation. In the above context, answer the following: (i) State the aspects you will consider during planning and performing the Engagement while evaluating the source from which the unadjusted financial information has been extracted. (ii) As a practitioner you need to obtain evidence about the appropriateness of the pro forma adjustments. Explain what it includes. (4 Marks)

Suggested Answer and Working Notes:

(a) (i) As per SAE 3420, as a practitioner, while planning and performing the engagement, the following aspects must be evaluated regarding the source of the unadjusted financial information: The practitioner shall obtain evidence about the appropriateness of the source from which the unadjusted financial information has been extracted.If there is no audit or review report on the source from which the unadjusted financial information has been extracted, the practitioner shall perform procedures to be satisfied that the source is appropriate.The practitioner shall determine whether the responsible party has appropriately extracted the unadjusted financial information from the source. (ii) The practitioner shall obtain evidence about the appropriateness of the pro forma adjustments: In relation to unadjusted financial information, Pro forma adjustments include: (a) Adjustments to unadjusted financial information that illustrate the impact of a significant event or transaction as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration, and (b) Adjustments to unadjusted financial information that are necessary for the pro forma financial information to be compiled on a basis consistent with the applicable financial reporting framework of the reporting entity and its accounting policies under that framework.

Topics: Standard on Auditing (SA)

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