For the purposes of this Standard on Assurance Engagements, the following terms have the meanings attributed below:
Assumptions mean expectations made by the responsible party as to future events and actions expected to take place as at the date the prospective financial information is prepared and exclude hypothetical assumptions, unless otherwise stated.
Assurance report means a written report prepared by an independent assurance practitioner that provides assurance on a single type of financial information (individual assurance report) or on multiple types of financial information (either a composite assurance report or separate assurance reports for each type of financial information). When prepared in connection with a fundraising it is often referred to as an “Independent Assurance Report” or “Investigating Accountant’s Report”.
Base financial information means financial information that is used as the starting point for the application of pro forma adjustments by the responsible party. Base financial information is ordinarily historical in nature, however, it can also be prospective (for example a profit forecast). It may or may not have been previously audited or reviewed. Base financial information may also be referred to as unadjusted or source financial information.
Corporate fundraising (“fundraising”) means any transaction involving shares, debentures, units or interests in a management investment scheme undertaken to raise debt or equity funds, or issue equity, and/or offer and/or respond to an offer of, cash and/or scrip consideration to effect a transaction through the issuance of a public or non‑public document. It includes initial public offerings, fundraisings, takeovers, schemes of arrangement or other corporate restructures.
Different elements of prospective financial information means:
- the assumptions used in the preparation of the prospective financial information; (element 1)
- the stated basis of preparation and the assumptions referred to in (i) above; (element 2) and
- its reasonableness (element 3).
Document means a public document or non‑public document related to a corporate fundraising or other document containing prospective financial information.
Engaging party means the body or person(s) that requested the services of the assurance practitioner for the assurance engagement. The engaging party is ordinarily the responsible party, as defined in paragraph (cc) below of this ASAE. References in this ASAE to “responsible party” are taken to include the engaging party unless otherwise stated.
Entity means the entity responsible for the preparation and issuance of the public document or other document.
Event(s) or transaction(s) means underlying event(s) or transaction(s) that is (are):
- primarily the subject of the document; or
- not the subject of the document but the effect(s) of which have been reflected in the financial information.
Financial information means information of a financial nature prepared by the responsible party in the form of:
- base financial information;
- historical financial information;
- pro forma historical financial information;
- prospective financial information; or
- a pro forma forecast.
Historical financial information means information expressed in financial terms in relation to a particular entity, which is derived primarily from that entity’s accounting system and relates to events occurring in past time periods or about conditions or circumstances at points in time in the past.
Hypothetical assumptions means assumptions made by the responsible party in preparing prospective financial information in the form of a projection about future events and management actions which may not necessarily be expected to take place or that may be expected to take place, and may not be based on reasonable grounds.
Limited assurance engagement means an assurance engagement in which the assurance practitioner reduces the assurance engagement risk to a level that is acceptable in the circumstances of the assurance engagement, but where the risk is greater than for a reasonable assurance engagement. The set of procedures performed in a limited assurance engagement is limited compared with that necessary in a reasonable assurance engagement, but is planned to obtain a level of assurance that is, in the assurance practitioner’s professional judgement acceptable in the circumstances of the assurance engagement. An example of a limited assurance engagement is a review.
Management means the person(s) with executive responsibility for the conduct of the operations or individual business units of the entity. For some entities, in some circumstances, management includes some or all of those charged with governance, for example, executive members of a governance board, or an owner‑manager.
Materiality means in relation to information, that if certain information is omitted, misstated, or not disclosed, that information has the potential to affect the economic decisions of users of the document, or the discharge of accountability by management or those charged with governance of the entity (the responsible party).
Misstatement of fact means information that is incorrectly stated or presented in the document. A material misstatement of fact may undermine the credibility of financial information that is the subject of the assurance report.
Non‑public document means a document in relation to a fundraising or a document containing prospective financial information, which is not a public document. It is not prepared in accordance with the Corporations Act 2001.
Pro forma adjustments means adjustments selected by the responsible party in accordance with the stated basis of preparation to make to base financial information (historical or prospective) to:
- illustrate the impact of a significant event or transaction (“event” or “transaction”) as if the event had occurred or the transaction had been undertaken at an earlier date than actually occurred, or as if it had not occurred at all; and/or
- eliminate the effects of unusual or non‑recurring event(s) or transaction(s) that are not part of the normal operations of the entity; and/or
- exclude certain event(s) or transaction(s), or present transactions or balances on a different recognition and measurement basis from that required or permitted by Australian Accounting Standards; and/or
- correct errors or uncertainties.
Pro forma financial information means base financial information adjusted for pro forma adjustments in accordance with the stated basis of preparation, resulting in non‑IFRS financial information that is not prepared in accordance with Australian Accounting Standards. It is subject to the assumptions inherent in the responsible party’s stated basis of preparation.
Prospective financial information means financial information of a predictive character prepared based on assumptions made by the responsible party, in accordance with the stated basis of preparation. Prospective financial information may be either:
- a forecast which is prepared based on the responsible party’s assumptions as to future events expected to take place on the dates, or in the period, described and the actions expected to be taken at the date the financial information is prepared. It is commonly referred to as a “directors’ forecast”; or
- a projection which is prepared based on the responsible party’s material hypothetical assumptions, or a mixture of assumptions and material hypothetical assumptions as to future events which are not necessarily expected to take place on the dates, or in the period, described and the actions not necessarily expected to be taken at the date the financial information is prepared (a “what-if” scenario).
Public document means a disclosure document, product disclosure statement or other documentation provided to shareholders, unit holders, or holders of a relevant interest in an entity (or which is provided to management of an entity) in relation to a scheme of arrangement under Part 5.1 of the Corporations Act 2001, or a takeover or compulsory acquisition under Chapter 6 of the Corporations Act 2001. Examples include:
- A prospectus prepared by an entity that is a corporation in accordance with relevant sections of the Corporations Act 2001.
- A Short‑Form Prospectus; lodged with the Australian Securities and Investments Commission (ASIC), instead of including in the body of the prospectus the relevant information discussed in such materials.
- Scheme Booklets.
- Target Statements.
- Bidder Statements.
- Profile Statements; this is a brief statement that may be sent out with offers, with ASIC’s approval, instead of a prospectus.
- Offer Information Statements; this is a document that may be used instead of a prospectus under certain criteria set by the Corporations Act 2001.
- Product Disclosure Statements (PDS) used where the entity is a trust or other type of managed investment scheme.
Reasonable assurance engagement means an assurance engagement where the assurance practitioner reduces the assurance engagement risk to an acceptably low level in the circumstances of the assurance engagement as the basis for the assurance practitioner’s conclusion.
Responsible party means those charged with governance of the entity (ordinarily the Board of Directors), who are also responsible for the preparation and issuance of the financial information included in the document. It may also mean the management of the entity in circumstances where the assurance practitioner has been requested to provide assurance to those charged with governance in relation to financial information prepared by management. Alternatively it may also mean the party responsible for the preparation of the financial information. The responsible party may be different from the party that is the engaging party.
Stated basis of preparation means the basis on which the responsible party has chosen to prepare the financial information that is acceptable in view of the nature and objective of the document, or as required by applicable law or regulation. A stated basis of preparation may include:
- the recognition and measurement principles contained in the Australian Accounting Standards (but not all the presentation and disclosure requirements), and the entity’s adopted accounting policies;
- recognition and measurement principles contained in the Australian Accounting Standards adjusted by pro forma adjustments, selected for the purpose for which the pro forma financial information (i.e. non-IFRS financial information) is presented;
- recognition and measurement principles other than those contained in Australian Accounting Standards; or
- a basis selected by the responsible party, in order to present the financial information for its intended purpose.
Subsequent events mean events or facts that become known to the assurance practitioner after the date of the assurance report and prior to the relevant date.
Takeover means the acquisition of control of listed or unlisted entities conducted in accordance with Chapter 6 of the Corporations Act 2001.
See Section 700 of the Corporations Act 2001.
See ASA 200, paragraph Aus 13.1, for guidance on determining the nature of historical financial information for an assurance engagement.
See RG 170 Prospective Financial Information, issued by the Australian Securities and Investments commission (ASIC) (April 2011) for further guidance on hypothetical assumptions.
See AASB 101 Presentation of Financial Statements, paragraph 7, issued by the Australian Accounting Standards Board for a definition of materiality, and ASA 320 Materiality in Planning and Performing an Audit for further guidance on the concept of materiality in the preparation of a financial report, and may also be helpful in considering materiality in assurance engagements.
See ASA 720 The Auditor’s Responsibilities Relating to Other Information in Documents Containing an Audited Financial Report for guidance on material inconsistencies in an audit engagement, which may be helpful in assurance engagements.
See ASA 720 for guidance on the concept of misstatement of fact which may be helpful in assurance engagements.
See RG 230 Disclosing non‑IFRS financial Information (December 2011), issued by ASIC for a definition of, and discussion on, non‑IFRS financial information (see RG 230.14), as well as further guidance on pro forma financial information included in transaction documents.
Accounting Standards are ordinarily those issued by the Australian Accounting Standards Board.
See RG 170, which contains guidance that prospective financial information that includes a projection (that is, supported by material hypothetical assumptions) rather than reasonable grounds is likely to be misleading and therefore is not permitted to be included in a public document.
See Sections 710, 711, and 713 of the Corporations Act 2001.
See Section 712 of the Corporations Act 2001.
See Sections 705 and 721 of the Corporations Act 2001.
See Section 709 of the Corporations Act 2001 for the criteria as to when an Offer Information Statement may be used instead of a prospectus.
See RG 170 for further guidance on the concept of reasonable grounds in relation to public documents.