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The Role of CPAs in Financial Forecasts

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Title: The Role of CPAs in Financial Forecasts
Authors: Hatakeyama, Stephen
Issue Date: 15 Jan 2014
Publisher: University of Hawaii at Manoa
Abstract: An age-old controversy has taken on yet another dimen­ sion with the recent release of an exposure draft entitled, "Proposed Guide for Prospective Financial Statements" by the American Institute of CPAs. The issue of whether or not to include financial forecasts in corporate annual reports may be a step closer to resolution based on this latest au­ thoritative pronouncement of the accounting profession on prospective financial statements. "The exposure draft pro­ poses guidelines for the services accountantslmay provide concerning prospective financial statements. To encourage companies to engage in forecasting, the AICPA has redefined "forecast" as a presentation of a company's future financial position based on conditions management expects to exist in the future and actions it expects to take. A "projection" has been redefined as a presentation of expected future financial position, results of operations and changes in financial position given the occurrence of one or more hypo­ thetical assumptions based on conditions management expects would exist and actions it would take if the hypothetical assumptions materialized. This delineation between a fore­ cast and a projection has made forecasting much more practi­ cable in the financial community. Furthermore, the AICPA provides management with a multiple projection when actual results are expected to fall within a range of values rather than on a single point estimate. A combination of market and litigation considerations would keep managements' estimated ranges within reason. A significant feature of the exposure draft is a proposal to require the accountant to report when­ ever he is associated with prospective financial statements.
Pages/Duration: 48 pages
Rights: All UHM Honors Projects are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission from the copyright owner.
Appears in Collections:Honors Projects for Business Administration

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