## Assurance on Prospective Financial Information (PFI)

This is an assurance engagement dealing with matters OTHER than historical financial information.

### What is Prospective Financial Information?

PFI is financial information based on assumptions about:

Events that may occur in the future, and
Possible actions by the entity.

Unlike historical FS, PFI has not happened yet — it is a projection or forecast.

Example (Shark Tank India style):

	FY 25-26	FY 26-27	FY 27-28
Sales	₹X	₹Y	₹XX
Purchase	₹**	₹**	₹**

These figures are future estimates based on management's assumptions.

### What Does the Practitioner Examine?

The practitioner does NOT verify past events. Instead, they assess:

1. Whether management's assumptions are reasonable

2. Whether PFI is properly presented and material assumptions are disclosed

3. Whether PFI is properly prepared on the basis of stated assumptions

### Assurance Level and Language

Feature	PFI Engagement
Level of Assurance	Moderate (cannot be high — future is uncertain)
Language	Negative — "Nothing has come to our attention to suggest assumptions are unreasonable"

### Two Sub-Types of 'Other' Assurance Engagements

1. Assurance on Prospective Financial Information (forecasts, projections)

2. Assurance on Internal Controls of an entity

> Both are distinct from Audit and Review, which deal with historical information.

Worked example

### Example 1

Bank loan projection: A company seeking a ₹10 crore term loan prepares a 3-year projection showing revenue growing from ₹8 crores to ₹20 crores. The bank asks for CA assurance on the PFI. The CA checks: (1) Are the revenue growth assumptions reasonable given the market? (2) Are key assumptions (pricing, capacity, market size) disclosed? The CA issues: 'Nothing has come to our attention to suggest the assumptions are unreasonable.' — negative assurance, moderate level.

### Example 2

Shark Tank pitch: An investor asks a startup for independently reviewed projections. The reviewer examines the basis for assumptions (industry growth rate, customer acquisition cost, margins) — not whether past sales happened. The CA cannot certify the startup will hit its targets, only that the assumptions underlying them are reasonable.

⚠️ Common exam mistakes

Confusing PFI assurance with a statutory audit — PFI is about future projections; audit is about past historical FS
Expecting high (positive) assurance in a PFI engagement — future events cannot be verified, so only moderate assurance with negative language is appropriate
Assuming the practitioner certifies that projected figures will actually be achieved — they only opine on the reasonableness of assumptions, not the accuracy of the forecast
Mixing up the two sub-types: assurance on PFI and assurance on internal controls are different engagements with different subject matters

Reference: — SAE 3400 – The Examination of Prospective Financial Information

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