SAE 3450

1. This Standard on Assurance Engagements (SAE) deals with the responsibilities of the assurance practitioner when performing an assurance engagement and reporting on the responsible party’s preparation of published financial information prepared in connection with a capital raising.

2. This SAE applies to assurance engagements to provide a limited assurance report on the financial information. It may be applied, adapted as necessary, for assurance engagements over financial information prepared for another purpose, for example, in connection with a direct listing, or for assurance over prospective financial information prepared for any other purpose. (Ref: Para. A1)

3. The types of financial information covered by this SAE are:

• Historical,

• Pro forma historical,

• Prospective and

• Pro forma prospective

financial information prepared in respect of a capital raising. The financial information may be in respect of one entity or multiple entities (for example, in the case of a merger or acquisition).

4. Assurance engagements covered by this SAE often involve the assurance practitioner performing an assurance engagement, and reporting, on more than one type of financial information. In such circumstances, the assurance practitioner conducts the engagement in accordance with the applicable requirements and related application and other explanatory material and reports the assurance conclusion for each type of financial information in the assurance report. Non-assurance services are outside the scope of this engagement. (Ref: Para. A2)

5. Assurance engagements other than audits or reviews of historical financial information are conducted in accordance with ISAE (NZ) 3000 (Revised)¹. Assurance engagements that are reviews of historical financial information are conducted in accordance with the applicable Review Engagement Standard. This SAE deals with specific considerations in the application of ISAE (NZ) 3000 (Revised) and the applicable Review Engagement Standard² to engagements dealing with assurance over financial information prepared in connection with a capital raising.

6. The assurance practitioner is required to comply with ISAE (NZ) 3000 (Revised) and the applicable Review Engagement Standard, and this SAE when performing an assurance engagement to report on published financial information prepared in connection with a capital raising. This SAE supplements but does not replace ISAE (NZ) 3000 (Revised) or the applicable Review Engagement Standard.

7. Compliance with ISAE (NZ) 3000 (Revised) and the applicable Review Engagement Standard requires, among other things, compliance with the provisions of Professional and Ethical Standard 1  International Code of Ethics for Assurance Practitioners (including International Independence Standards (New Zealand)³ issued by the New Zealand Auditing and Assurance Standards Board related to assurance engagements, or other professional requirements, or requirements imposed by law or regulation that are at least as demanding.⁴ It also requires the lead assurance practitioner to be a member of a firm that applies Professional and Ethical Standard 3⁵, or other professional requirements, or requirements in law or regulation, that are at least as demanding as Professional and Ethical Standard 3.⁶

8. This SAE shall apply for engagements commencing on or after 15 December 2023. Early adoption is permitted on a voluntary basis.

9. The objectives of the assurance practitioner are:

1. To obtain limited assurance about whether the financial information is free from material misstatement, thereby enabling the assurance practitioner to express a limited assurance conclusion;

2. To report, in accordance with the assurance practitioner’s findings; and

3. To communicate further as required by this SAE, in accordance with the assurance practitioner’s findings.

10. For purposes of this SAE, the following terms have the meanings attributed below⁷:

1. Assumption – A view taken by the responsible party about the future for the purpose of preparing prospective financial information, for example views about economic and business conditions and proposed courses of action. (Ref: Para. A3)

2. Assurance report – A written report prepared by an independent assurance practitioner. (Ref: Para. A4)

3. Base financial information – Financial information that is used as the starting point for the application of the pro forma adjustments. Base financial information is ordinarily historical in nature, however, it can also be prospective. (Ref: Para. A5)

4. Base historical financial information – Base financial information that is historical in nature.

5. Capital raising – Any transaction involving debt securities, equity securities, managed investment products or derivatives as defined by the Financial Markets Conduct Act 2013 undertaken to effect a transaction through the issuance of published financial information in accordance with the Financial Markets Conduct Regulations 2014. (Ref: Para. A6)

6. Financial information – Information of a financial nature prepared by the responsible party in the form of:

   1. Historical financial information;

   2. Pro forma historical financial information;

   3. Prospective financial information; or

   4. Pro forma prospective financial information.

7. Pro forma adjustments –Adjustments to the base financial information to:

   1. Illustrate the impact of a transaction or event 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;

   2. Eliminate the effects of unusual or non-recurring events or transactions that are not part of the normal operations of the entity; or

   3. Exclude certain events or transactions or present transactions or balances on a different recognition or measurement basis from that required or permitted by generally accepted accounting practice in New Zealand.

8. Pro forma financial information – Base financial information shown together with pro forma adjustments prepared in accordance with the stated basis of preparation resulting in financial information that is not prepared in accordance with generally accepted accounting practice in New Zealand. It is subject to the assumptions inherent in the responsible party’s stated basis of preparation.

9. Prospective financial information⁸ – Future oriented financial information prepared for external users who are unable to require, or contract for, the preparation of special reports to meet their specific information needs. Prospective financial information is based on assumptions made by the responsible party about events that may occur in the future and possible actions by the entity. (Ref: Para. A7)

10. Published financial information - Financial information prepared for the purpose of the capital raising and that is made available publicly, for example, the product disclosure statement and online register entry.

11. Responsible party – The party(ies) responsible for the source and basis of preparation of the financial information and other engagement circumstances.

12. Stated basis of preparation – 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 published financial information, or as required by applicable law or regulation. (Ref: Para. A8)

11. In this SAE, the applicable Review Engagement Standard refers to International Standard on Review Engagements (New Zealand) 2400, Review of Historical Financial Statements Performed by an Assurance Practitioner who is Not the Auditor of the Entity, or New Zealand Standard on Review Engagements 2410 (Revised), Review of Financial Statements Performed by the Independent Auditor of the Entity, as applicable for the circumstances of the engagement.

12. The assurance practitioner shall not represent compliance with this SAE unless the assurance practitioner has complied with the requirements of both this SAE and ISAE (NZ) 3000 (Revised) and the applicable Review Engagement Standard.

13. When establishing whether the preconditions for an assurance engagement are present, as required by ISAE (NZ) 3000 (Revised)⁹ and the applicable Review Engagement Standard, the assurance practitioner shall obtain the agreement of the responsible party that they acknowledge and understand their responsibility for: (Ref: Para. A9-A16)

1. The selection of the financial information.

2. The preparation of the financial information in accordance with the stated basis of preparation.

3. Determining the applicable time period to be covered by the financial information.

4. Maintaining adequate accounting records and such internal control as is determined to be necessary to enable the preparation of financial information that is free from material misstatement.

14. In an engagement to provide assurance over prospective financial information, the acknowledgement obtained in accordance with paragraph 13 shall include acknowledgement from the responsible party that the prospective financial information:

1. Is based on assumptions that are reasonable and supportable; and

2. Faithfully represent the assumptions on which the prospective financial information is based.

15. ISAE (NZ) 3000 (Revised)¹⁰ and the applicable Review Engagement Standard require the parties to the engagement to agree the terms of the engagement. The agreed terms shall be in writing and shall include: (Ref: Para.A17)

1. The objective and scope of the engagement, including that the engagement is a limited assurance engagement; (Ref: Para.A18)

2. The responsibilities of the assurance practitioner;

3. The responsibilities of the responsible party, including those described in paragraphs 13 and, if applicable, 14;

4. Identification of the stated basis of preparation for the financial information;

5. Reference to the expected form and content of any reports to be issued by the assurance practitioner and a statement that there may be circumstances in which a report may differ from its expected form and content;

6. An expectation that the responsible party will provide written representations at the conclusion of the engagement;

7. An expectation that the responsible party will provide access to all information of which it is aware that is relevant to the preparation of the financial information, including an expectation that the responsible party will provide access to information relevant to disclosures; and

8. Such other terms that the assurance practitioner determines are appropriate in the engagement circumstances. (Ref: Para. A19)

16. Where there is a change in the terms of the engagement such change in the terms shall be agreed, in writing, with the engaging party. (Ref: Para. A20)

17. When planning the engagement as required by ISAE (NZ) 3000 (Revised)¹¹ and the applicable Review Engagement Standard, the assurance practitioner shall: (Ref: Para A21-A23)

1. Establish an overall engagement strategy that sets the scope, timing and direction of the engagement and that guides the development of the plan;

2. Ascertain the reporting objectives of the engagement to plan the timing of the engagement and the nature of the communications required;

3. Consider the factors that, in the assurance practitioner’s professional judgement, are significant in directing the engagement team’s efforts;

4. Consider the results of engagement acceptance or continuance procedures and, where applicable, whether knowledge gained on other engagements performed by the lead assurance practitioner for the entity is relevant;

5. Assess assurance engagement risk and consider the nature, timing and extent of planned risk assessment procedures;

6. Ascertain the nature, timing and extent of resources needed to perform the engagement, including the involvement of experts and other assurance practitioners; and

7. If applicable, determine whether the entity’s external auditor or assurance practitioner will need to be contacted in respect of the audit opinion or review conclusion expressed on the most recent historical financial statements.

18. The assurance practitioner shall determine materiality for the financial information as a whole, and apply this materiality in designing the procedures and in evaluating the results obtained from those procedures. (Ref: Para. A24-A27)

19. The assurance practitioner shall revise materiality in the event of becoming aware of information during the engagement that would have caused the assurance practitioner to have determined a different amount initially. (Ref: Para. A28)

20. If the assurance practitioner does not have prior knowledge of the entity, the assurance practitioner shall obtain an understanding of the nature of the entity, and any acquiree or divestee whose financial information is included in the published financial information that is the subject of the assurance report. (Ref: Para. A29)

21. The assurance practitioner shall obtain an understanding of the source and basis of preparation of the financial information and other engagement circumstances sufficient to: (Ref: Para. A30)

1. Enable the assurance practitioner to identify areas where a material misstatement of the financial information is likely to arise; and

2. Thereby, provide a basis for designing and performing procedures to address the areas identified in paragraph 21(a) and to obtain limited assurance to support the practitioner’s conclusion.

22. In obtaining an understanding of the source and basis of preparation of the financial information and other engagement circumstances under paragraph 21, the assurance practitioner shall obtain an understanding of internal control over the process used to prepare the financial information. (Ref: Para. A31)

23. If the assurance practitioner has performed other engagements for the entity, the assurance practitioner shall consider whether information obtained from those other engagements is relevant to understanding the source and basis of preparation of the financial information and other engagement circumstances.

24. In obtaining the understanding required by paragraph 21, the assurance practitioner shall obtain an understanding of:

1. The form in which the financial information will be published;

2. The financial information; (Ref: Para. A32)

3. The stated basis of preparation chosen by the responsible party for the financial information including whether it is different from prior audited or reviewed historical financial information also included in the published financial information, and if so, why; (Ref: Para. A33)

4. Events and transactions that may have a significant impact on the preparation of the financial information;

5. The nature and type of other information to be included with the financial information, if available, sufficient to enable the assessment of whether it is consistent with the financial information;

6. Relevant industry, legal and regulatory and other external factors related to the financial information or that may impact the financial information; (Ref: Para. A34-A36)

7. Any recent key changes in the entity’s business activities, and how such changes may affect the financial information;

8. Whether experts are required, and the extent to which their work will be used; and

9. The competence of the preparers of the financial information.

25. In an engagement to provide assurance over pro forma historical financial information, in addition to the understanding required by paragraph 24, the assurance practitioner shall obtain an understanding of:

1. The source of the base historical financial information;

2. Whether the base historical financial information has been previously audited or reviewed and, if so, the type of opinion or conclusion expressed and the implications, if any, on the engagement; and (Ref: Para. A37-A38)

3. The pro forma adjustments. (Ref: Para. A39)

26. In an engagement to provide assurance over prospective financial information, in addition to the understanding required by paragraph 24, the assurance practitioner shall obtain an understanding of:

1. The stated basis of preparation chosen by the responsible party; (Ref: Para. A40)

2. The accuracy of any prospective financial information prepared in prior time periods, and the reasons for any material variances;

3. Whether comparative financial information is to be included, and whether it will be restated;

4. Relevant financial information available in the public domain;

5. Key expectations and relationships in the prospective financial information for use when designing and performing analytical procedures; and

6. Significant assumptions used in the prospective financial information.

27. In an engagement to provide assurance over pro forma prospective financial information, in addition to the understanding required by paragraphs 24 and 26, the assurance practitioner shall obtain an understanding of:

1. The source of the base financial information used in the preparation of the pro forma prospective financial information including whether it has been previously audited or reviewed; (Ref: Para. A37-A38)

2. The stated basis of preparation of the pro forma prospective financial information;

3. The pro forma adjustments; and

4. Any recent key changes in the entity’s business activities and how they affect the pro forma prospective financial information.

28. The lead assurance practitioner and other key engagement team members shall discuss the application of the stated basis of preparation and the susceptibility of the financial information to material misstatement.

29. When there are engagement team members not involved in the engagement team discussion, the lead assurance practitioner shall determine which matters are to be communicated to those members.

30. Based on the assurance practitioner’s understanding obtained in accordance with paragraph 21, the assurance practitioner shall:

1. Identify areas where a material misstatement of the financial information is likely to arise; and (Ref: Para. A41)

2. Design and perform procedures to address the areas identified in paragraph 30(a) and to obtain limited assurance to support the assurance practitioner’s conclusion. (Ref: Para. A42)

31. The assurance practitioner shall perform the following procedures on the financial information:

1. In respect of comparative information:

   1. Read the most recent audited or reviewed financial report in order to identify any matters that may affect the financial information;

   2. Compare, for consistency, its stated basis of preparation against the entity’s previously audited or reviewed historical financial information and if applicable, the most recent unaudited or unreviewed annual or interim financial report;

   3. Evaluate the reasons for any differences; and

   4. Determine that any restatements or adjustments made are appropriate;

2. Evaluate the reasonableness and appropriateness of the time period covered;

3. Enquire of the responsible party in respect of the financial information:

   1. That it agrees to, and has been reconciled to underlying, supporting accounting records and documentation;

   2. That it reflects any changes made to the stated basis of preparation from the most recent audited or reviewed financial statements;

   3. That it reflects the results of any identified misstatements from the prior year’s financial statements;

   4. If any part of the financial information has been previously audited or reviewed, that it agrees to those audited or reviewed records;

4. Evaluate the appropriateness and suitability of any adjustments made by the responsible party as compared to the stated basis of preparation;

5. Perform analytical procedures on the financial information. (Ref: Para. A43-A44)

6. If applicable, enquire how the responsible party makes significant accounting estimates included in the financial information; (Ref: Para. A45-A47)

7. In respect of the stated basis of preparation:

   1. Understand the process for its selection and approval;

   2. Understand what accounting policies have been adopted;

   3. Evaluate its reasonableness and suitability;

   4. Perform consistency checks in the application of the stated basis of preparation to the financial information;

   5. Evaluate, based on the assurance practitioner’s understanding, whether the stated basis of preparation is adequately described in the document; and

   6. Evaluate whether the financial information is prepared in all material respects in accordance with the stated basis of preparation;

8. Enquire of the responsible party and other relevant parties whether there were:

   1. Any changes in accounting policies, financial reporting practices and other reporting requirements that occurred during the relevant time period;

   2. Any adjustments made to convert the financial information from an overseas jurisdiction’s generally accepted accounting principles to the stated basis of preparation;

   3. Any unadjusted differences from the most recently audited or reviewed financial report that may be material for purposes of the published financial information;

   4. Any other provisions and other accounting estimates (such as asset revaluations) in the financial information;

   5. Any significant transactions with related parties (for example, assets purchased from an associated entity); and

9. Such other procedures that, in the assurance practitioner’s judgement, are appropriate. (Ref: Para. A48)

32. In addition to the procedures required by paragraph 31, the assurance practitioner’s procedures on the pro-forma historical financial information shall include:

1. Such procedures as are necessary, in relation to the base historical financial information, to obtain sufficient appropriate evidence in relation to that financial information on which to rely for engagement purposes; (Ref: Para. A49-A50)

2. Understanding the stated basis of preparation for the pro forma historical financial information;

3. Understanding the basis for, and calculations underlying the pro forma adjustments; (Ref: Para. A51-A52)

4. Determining whether the pro forma adjustments:

   1. Have been selected and applied to the base historical financial information in accordance with the stated basis of preparation;

   2. Are supported by sufficient appropriate evidence;

   3. Are arithmetically correct; and

5. Determining whether the resultant pro forma historical financial information reflects the results of applying the pro forma adjustments to the base financial information.

33. In addition to the procedures required by paragraph 31, for assurance over prospective financial information, to obtain evidence about the source of the prospective financial information, the assurance practitioner shall:

1. Make enquiries of the responsible party, experts and relevant parties on the nature of the source of the prospective financial information;

2. If the source of the prospective financial information includes material historical financial information which has been previously audited or reviewed:

   1. Read the historical financial information to which the audit or review report relates to establish if its stated basis of preparation and time frame covered are appropriate; and

   2. Read the audit or review report to assess whether the report was modified and, if so, why, and the impact if any on the engagement, and whether there are any matters that may affect the prospective financial information; or

3. If the source of the prospective financial information includes material historical financial information which has not been previously audited or reviewed: (Ref: Para. A53)

   1. Ascertain whether the assurance practitioner is able to access all required documentation describing and supporting the source;

   2. Enquire of the responsible party about:

      • The process by which the source has been prepared and the reliability of its underlying accounting records;

      • Whether all transactions for the time period have been recorded;

      • Whether the source has been prepared in accordance with the entity’s accounting policies and stated basis of preparation.

      • Whether there have been any changes in accounting policies from that adopted in the most recent audited or reviewed financial statements and, if so, how such changes have been dealt with;

      • The responsible party’s assessment of the risk that the source may be materially misstated as a result of error or fraud;

      • How recently the entity’s historical financial information was audited or reviewed;

      • Whether there have been any changes in the entity’s business activities and operations, and if so, their effect on the source; and

      • The extent to which statistical and mathematical modelling, automated tools and techniques and other techniques have been used in the preparation of the prospective financial information, and the reliability of those techniques; or

   3. If the assurance practitioner has audited or reviewed the immediately preceding annual or interim historical financial information, consider the findings and whether these might indicate any issues with the preparation of the source from which the historical financial information has been extracted;

4. Evaluate the adequacy and reliability of the source of the prospective financial information;

5. Evaluate the accuracy of any prospective financial information prepared in prior time periods compared to actual financial results, and the reasons provided for significant variances; and (Ref: Para. A54)

6. Determine whether the source of the prospective financial information reflects any changes made to the stated basis of preparation from the prior audited or reviewed period, and if so:

   1. Determine the nature of, and reasons for, the changes and their effect on the prospective financial information;

   2. Evaluate whether there have been any reclassifications or adjustments made by the responsible party to reflect unusual or non-recurring items, or to correct known errors and uncertainties and the reasonableness of such adjustments; and

   3. Evaluate any difference between the basis of preparation of the prospective financial information and that of other types of financial information included in the published financial information.

34. If the assurance practitioner is unable to assess whether the source of the prospective financial information is appropriate, the assurance practitioner shall consider the implications for the engagement and the assurance report.

35. The assurance practitioner shall perform the following procedures on the assumptions:

1. Read the most recent audited or reviewed financial report, and, if appropriate, the most recently prepared annual or interim financial information, to enable an assessment of the assumptions used in the preparation of the prospective financial information;

2. Enquire of the responsible party of:

   1. The source, degree of reliability, uncertainty, verifiability, and validity of the assumptions, including whether the assumptions are objectively reasonable;

   2. The time period the assumptions cover;

   3. The methodology used in development and quantification of the assumptions, including the extent to which they are affected by the responsible party’s judgement;

   4. The likelihood of the assumptions actually occurring; and/or

   5. Whether the assumptions have a wide range of possibilities, or their outcomes are particularly sensitive to fluctuations, and if so, the effect on the prospective financial information of such sensitivities; (Ref: Para. A55)

3. Evaluate whether all significant assumptions required for the preparation of the prospective financial information have been identified;

4. Determine whether the assumptions used in the preparation of the prospective financial information are consistent with the stated basis of preparation;

5. Determine whether the assumptions are arithmetically correct;

6. Consider whether the significant assumptions are reasonable and supportable;

7. Evaluate whether the assumptions are within the entity’s capacity to achieve in light of the assurance practitioner’s understanding of the prospective financial information;

8. Review the responsible party’s sensitivity analysis to test the responsiveness, or otherwise, of the prospective financial information to material changes in key assumptions underlying that prospective financial information; and

9. Consider the responsible party’s reliance on the work of experts in relation to the assumptions.

36. If the responsible party’s assumptions on which the prospective financial information has been prepared lack supporting evidence, and are determined by the assurance practitioner not to be reasonable and supportable, the assurance practitioner shall determine the implications for the engagement and the assurance report, taking into account any applicable law or regulation.

37. To ascertain whether the prospective financial information has been prepared in accordance with the stated basis of preparation and the assumptions, the assurance practitioner shall:

1. Evaluate the stated basis of preparation used by the responsible party in the preparation of the prospective financial information; (Ref: Para. A56)

2. Evaluate whether the stated basis of preparation described in the published financial information is consistent with the assurance practitioner’s understanding;

3. Agree or reconcile the significant assumptions to the stated basis of preparation;

4. Agree that the prospective financial information reflects any changes made to the stated basis of preparation from the previously audited or reviewed financial report included in the published financial information;

5. Review the internal consistency of assumptions including those with common variables (that is, the actions the responsible party intends to take are compatible with each other and there are no inconsistences in the determination of the amounts that are based on common variables, such as interest rates);

6. Perform clerical checks such as re-computations on the prospective financial information;

7. Consider the interrelationships of elements within the prospective financial information; and

8. Consider whether any other procedures are necessary in the circumstances.

38. The assurance practitioner shall perform the following procedures on the prospective financial information itself:

1. Evaluate the length of time covered by the prospective financial information by: (Ref: Para. A57)

   1. Enquiring of the responsible party the reasons for the choice of time period;

   2. Considering whether the time period is consistent with the entity’s normal reporting period and operating cycle so as to make it comparable to any previously issued historical financial information; and

   3. Considering whether any elapsed portion of the current time period is included in the prospective financial information;

2. Evaluate the type of business conducted by the entity, the assumptions included in the prospective financial information, and consequently the assessed volatility overall of the prospective financial information;

3. Consider the accuracy of prospective financial information prepared in prior time periods as compared to actual financial results and obtain and evaluate the responsible party’s reasons for any significant variances; and

4. Evaluate whether the prospective financial information is reasonable and supportable, based on evidence obtained throughout the engagement.

39. In addition to the procedures required by paragraph 31 and 33-38, for assurance over pro forma prospective financial information, the assurance practitioner shall:

1. Perform such procedures as are necessary, in relation to the base financial information, to obtain sufficient appropriate evidence on which to rely for engagement purposes; (Ref: Para. A58)

2. Determine whether the pro forma adjustments: (Ref: Para. A59)

   1. Are directly attributable to the events or transactions requiring the preparation of the pro forma prospective financial information;

   2. Have been selected and applied by the responsible party on a basis consistent with the stated basis of preparation;

   3. Are supported by sufficient appropriate evidence;

   4. Are arithmetically correct; and

   5. Reflect the planned events or transactions in the time period in which they are expected to occur; and

3. Evaluate whether the resultant pro forma prospective financial information reflects the results of applying the pro forma adjustments to the base financial information. (Ref: Para. A60-A61)

40. The assurance practitioner shall determine whether specialised skills or knowledge are required regarding the financial information and whether to use the work of an assurance practitioner’s expert. (Ref: Para. A62-A63)

41. The assurance practitioner shall request written representations from the appropriate party(ies): (Ref: Para.A64)

1. That they understand and accept the terms of the assurance engagement, including the assurance practitioner’s reporting responsibilities and the type of assurance, i.e., limited assurance, to be expressed.

2. That they acknowledge and understand their responsibility for:

   1. The preparation of the financial information in accordance with the stated basis of preparation;

   2. The selection of the financial information, including whether it contains comparatives;

   3. Determining the relevant time period to be covered by the financial information;

   4. The determination, selection, development, adequate disclosure and consistent application of the stated basis of preparation in the document;

   5. The contents, preparation and issuance of the published financial information;

   6. Complying with the requirements of the applicable laws and regulations in the preparation of the published financial information; and

   7. Such internal control as is determined to be necessary to enable the preparation of financial information and the published financial information.

3. That the going concern basis of preparation of the financial information is appropriate in the document.

4. That the assurance practitioner has been provided with all relevant information and access as agreed in the terms of engagement prior to the finalisation of the assurance report.

5. That all material events and transactions have been properly recorded in the accounting records underlying the financial information.

6. That there are no currently anticipated material changes to be made to the financial information between the date of the report and the date of the published financial information (or that any material changes that may have occurred have been advised to the assurance practitioner/firm).

7. Whether they believe the effects of uncorrected misstatements are immaterial, individually and in aggregate, to the financial information. A summary of such items shall be included in or attached to the written representations.

8. Whether there have been events, transactions, corrections, errors or other matters that have arisen or been discovered subsequent to the preparation of the financial information that may impact, or require adjustment to, the financial information.

9. Whether all material risks that may impact on the business have been adequately disclosed in the document and considered in relation to their impact on the financial information.

10. That they have disclosed to the assurance practitioner their knowledge of fraud or suspected fraud affecting the entity involving:

    1. Management;

    2. Employees who have significant roles in internal control; or

    3. Others where the fraud could have a material effect on the financial information.

11. That all known instances of non-compliance or suspected non-compliance with laws and regulations whose effects should be considered when preparing the financial information have been disclosed to the assurance practitioner.

12. Whether there have been any communications from governmental or other regulatory authorities concerning non-compliance with, or deficiencies in, the entity’s adherence to relevant legislation

13. Such other written representations that the assurance practitioner determines are appropriate in the engagement circumstances.

42. When the financial information includes pro forma historical financial information, the written representations requested by the assurance practitioner shall include, in addition to the requirements in paragraph 41, acknowledgement by the responsible party of its responsibility for:

1. Selecting the basis of preparation of the pro forma historical financial information;

2. Selecting the base historical financial information used as the source of the pro forma historical financial information; and

3. Selecting and determining the pro forma adjustments.

43. In addition to the representations required by paragraph 41, when the financial information includes prospective financial information, the assurance practitioner shall request the following representations from the appropriate party(ies):

1. That they understand and acknowledge their responsibility for determining the best estimate assumptions on which the prospective financial information is based, and that the assumptions are reasonable and supportable.

2. Confirmation of the completeness of all significant assumptions used in the preparation of the prospective financial information.

3. That the significant assumptions remain appropriate, even if the underlying information has been accumulated over a period of time.

44. When the financial information includes proforma pro forma prospective financial information, the written representations requested by the assurance practitioner shall include, in addition to the requirements in paragraphs 41 and 43, acknowledgement by the responsible party of its responsibility for:

1. Selecting the basis of preparation of the pro forma prospective financial information;

2. Selecting the base prospective financial information used as the source of the pro forma prospective financial information; and

3. Selecting and determining the pro forma adjustments.

45. If the assurance practitioner becomes aware of events, transactions or errors after the issuance of the assurance report and before the allotment date that require adjustment of, or disclosure in, the financial information, the assurance practitioner shall request the responsible party to correct those misstatements. (Ref: Para. A65)

46. The assurance practitioner shall revoke any consent to include the assurance report in the published financial information if in the assurance practitioner’s professional judgement, the matter referred to in paragraph 45 is not appropriately addressed by the responsible party.

47. A limited assurance engagement includes consideration of the entity’s ability to continue as a going concern. The assurance practitioner shall consider the responsible party’s assessment of the entity’s ability to continue as a going concern in order to obtain sufficient appropriate evidence regarding the appropriateness of the responsible party’s use of the going concern assumption in the preparation of the financial information. If identified uncertainties and related mitigating factors require significant judgements or assumptions, the assurance practitioner shall consider whether those significant judgements and assumptions are appropriately disclosed. (Ref: Para. A66-A67)

48. If the assurance practitioner concludes the entity is not a going concern, or if there is a material uncertainty related to events or conditions that individually, or collectively, may cast significant doubt about the entity’s ability to continue as a going concern, the assurance practitioner shall consider the implications for the engagement and the assurance report. (Ref: Para. A68)

49. The assurance practitioner shall form a conclusion about whether the financial information is free from material misstatement. In forming that conclusion, the assurance practitioner shall consider the assurance practitioner’s conclusion regarding the sufficiency and appropriateness of evidence obtained in the context of the engagement and the evaluation of whether uncorrected misstatements are material, individually or in the aggregate as required by ISAE (NZ) 3000 (Revised)¹² and the applicable Review Engagement Standard.

50. The assurance report shall be in writing and shall contain a clear expression of the assurance practitioner’s conclusion on each type of financial information that is the subject of the engagement.

51. The assurance practitioner shall clearly distinguish each type of financial information within the assurance report.

52. The assurance report shall include, at a minimum, the following basic elements: (Ref: Para. A71-A72)

1. A title that clearly indicates the report is an independent limited assurance report.

2. An addressee.

3. Identification of the financial information, including the period(s) it covers, and, if any information in the financial information is not covered by the assurance practitioner’s conclusion, clear identification of the financial information subject to assurance as well as the excluded information, together with a statement that the assurance practitioner has not performed any procedures with respect to the excluded information and, therefore, that no conclusion on it is expressed.

4. A description of the responsible party’s responsibilities.

5. Identification of the stated basis of preparation including:

   1. How the stated basis of preparation can be accessed; and

   2. If the stated basis of preparation needs to be supplemented by disclosures in the explanatory notes to the financial information for that stated basis of preparation to be suitable, identification of the relevant note(s).

6. When the stated basis of preparation is available only to specific intended users, or is relevant only to a specific purpose, a statement alerting readers to this fact and that, as a result, the financial information may not be suitable for another purpose. The statement shall also restrict the use of the assurance report to those intended users or that purpose.

7. A statement to identify the responsible party and the measurer or evaluator if different, and to describe their responsibilities and the assurance practitioner’s responsibilities.

8. A statement that the engagement was performed in accordance with SAE 3450, Assurance Engagements Over Financial Information Prepared in Connection with a Capital Raising. (Ref: Para. A73)

9. A statement that the firm of which the assurance practitioner is a member applies Professional and Ethical Standard 3, or other professional requirements, or requirements in law or regulation, that are at least as demanding as Professional and Ethical Standard 3. If the assurance practitioner is not a professional accountant, the statement shall identify the professional requirements, or requirements in law or regulation, applied that are at least as demanding as Professional and Ethical Standard 3.

10. A statement that the assurance practitioner complies with the independence and other ethical requirements of Professional and Ethical Standard 1, or other professional requirements that are at least as demanding as Professional and Ethical Standard 1. If the assurance practitioner is not a professional accountant, the statement shall identify the professional requirements, or requirements imposed by law or regulation, applied that are at least as demanding as Professional and Ethical Standard 1.

11. An informative summary of the work performed as the basis for the assurance practitioner’s conclusion. In a limited assurance engagement, an appreciation of the nature, timing and extent of procedures performed is essential to understanding the assurance practitioner’s conclusion. In a limited assurance engagement, the summary of work performed shall state that:

    1. The procedures performed in a limited assurance engagement vary in nature and timing from, and are less in extent than for, a reasonable assurance engagement; and (Ref: Para. A74 – A76)

    2. Consequently, the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had a reasonable assurance engagement been performed.

12. The assurance practitioner’s conclusion expressed in a form that conveys whether, based on the procedures performed and the evidence obtained, a matter(s) has come to the assurance practitioner’s attention to cause the assurance practitioner to believe that the financial information is not prepared, in all material respects, in accordance with the stated basis of preparation.

13. When the assurance practitioner expresses a modified conclusion, the assurance report shall contain:

    1. A section that provides a description of the matter(s) giving rise to the modification; and

    2. A section that contains the assurance practitioner’s modified conclusion.

14. A statement as to the existence of any relationship (other than as investigating accountant) the assurance practitioner has with, or any interests which the assurance practitioner has in, the entity.

15. A statement that the financial information has been prepared for the document, and that as a result, the financial information may not be suitable for another purpose.

16. If applicable, a consent statement.

17. The name of the lead assurance practitioner unless, in rare circumstances, such disclosure is reasonably expected to lead to a significant personal security threat.

18. The assurance practitioner’s signature.

19. The date of the assurance report. The assurance report shall be dated no earlier than the date on which the assurance practitioner has obtained the evidence on which the assurance practitioner’s conclusion is based, including evidence that those with the recognised authority have asserted that they have taken responsibility for the financial information.

20. The location in the jurisdiction where the assurance practitioner practices.

53. When reporting on pro forma historical financial information, in addition to the elements required by paragraph 52, the assurance report shall include:

1. Statements that:

   1. Identify the pro forma historical financial information being reported on, including the time period it covers;

   2. Identify whether there has been an audit or review conducted on the source from which the base historical financial information was prepared; and

   3. Cross reference to, or describe, the stated basis of preparation selected by the responsible party for the pro forma historical financial information.

2. If applicable, a statement that the engagement did not include updating or re- issuing any previous audit or review report on the base historical financial information used in the preparation of the pro forma historical financial information.

3. The assurance practitioner’s conclusion on the pro forma historical financial information.

54. When reporting on prospective financial information, in addition to the elements required by paragraph 52, the assurance report shall include:

1. A background section that identifies the purpose of the assurance report, and if applicable, the fact that it will be included in the published financial information;

2. Statements that:

   1. Identify the entities whose prospective financial information is the subject of the assurance report and, if applicable, the responsible party;

   2. Identify the source of the prospective financial information, its purpose, the time period covered and, if applicable, a statement that the prospective financial information has been prepared for inclusion in the published financial information and, that as a result, may not be suitable for another purpose; and

   3. Cross-reference to, or describe, the stated basis of preparation selected by the responsible party in the preparation of the prospective financial information.

3. Statements that:

   1. Actual results are likely to be different from the prospective financial information since anticipated events or transactions frequently do not occur as expected and the variation could be material; and

   2. Disclaim the assurance practitioner’s responsibility for the achievability of the results indicated by the prospective financial information.

55. When reporting on prospective financial information, in addition to the elements required by paragraphs 52 and 54, the assurance report shall include statements that:

1. Identify the pro forma prospective financial information, its purpose, the time period covered and, if applicable, a statement that the pro forma prospective

financial information has been prepared for inclusion in the published financial information and, that as a result, may not be suitable for another purpose.

1. Cross-reference to, or describe, the stated basis of preparation selected by the responsible party in the preparation of the pro forma prospective financial information.

56. The assurance practitioner shall read the other information that accompanies the published financial information to consider whether there are any material inconsistencies with the published financial information. (Ref: Para. A77-A79)

57. If a matter comes to the assurance practitioner’s attention that causes the assurance practitioner to believe that the other information appears to include a material misstatement, the assurance practitioner shall discuss the matter with the responsible party.

58. The assurance practitioner shall consider applicable law or regulation when the assurance practitioner has been requested to provide consent in writing to the responsible party for the inclusion of the assurance report in the published financial information. (Ref: Para. A80)

59. If the assurance practitioner does not consider it appropriate for the assurance report to be included in the published financial information, the assurance practitioner shall either not provide consent, or revoke consent prior to the allotment date.

A1. The assurance report may be on a single type of financial information (individual assurance report) or on multiple types of financial information. (Ref: Para. 2)

A2. In some circumstances the assurance practitioner may also agree to provide non- assurance services related to the capital raising, for example, participation in the entity’s due diligence committee or the preparation and issuance of a Materiality Advice Letter or similar document related to the capital raising to an entity’s due diligence committee. Such services are outside the scope of this standard. (Ref: Para. 4)

A3. The entity uses the best information that could reasonably be expected to be available at the time the prospective financial information is prepared in determining the assumptions used in the preparation of the prospective financial information.

A4. The assurance report may also be referred to as an “Investigating Accountant’s Report” or an “Independent Limited Assurance Report”.

A5. Base financial information may or may not have been previously audited or reviewed.

A6. Capital raising may include, for example, initial public offerings, takeovers, schemes of arrangement or other corporate restructures.

A7. Prospective financial information relates to events and conditions that have not yet occurred and may not occur. While evidence may be available to support the assumptions on which the prospective financial information is based, such evidence is itself generally future oriented and, therefore, speculative in nature, as distinct from the evidence ordinarily available in the audit of historical financial information. The assurance practitioner is, therefore, not in a position to conclude as to whether the results shown in the prospective financial information will be achieved.

A8. A stated basis of preparation may include:

• The recognition and measurement principles contained in New Zealand Equivalents to International Financial Reporting Standards (but not all the presentation and disclosure requirements) and the entity’s adopted accounting policies;

• The recognition and measurement principles contained in New Zealand Equivalents to International Financial Reporting Standards adjusted for pro forma adjustments, selected by the responsible party and disclosed in the applicable disclosure document; or

• Any other basis of preparation selected by the responsible party and disclosed in the applicable disclosure document that meets the requirements for suitable criteria in accordance with Explanatory Guide Au1 A Framework for Assurance Engagements.

A9. The engaging party is ordinarily the responsible party. References in this SAE to responsible party are taken to include the engaging party  unless otherwise stated.

A10. The responsible party is ultimately responsible for the preparation and presentation of the published financial information. The responsible party may engage experts, for example, tax advisors, business advisors or legal counsel, who may prepare, assist with the preparation of, or provide independent advice on, the financial information included in the published financial information; however, the responsible party retains responsibility for such information. The only exception to this is in respect of reports prepared by other parties, including experts, which are included, by consent, in the published financial information.

A11. If the responsible party is not also the engaging party, the assurance practitioner ordinarily considers the effect this may have on the ability to access records, documentation and other information that may be needed by the assurance practitioner to complete the engagement.

A12. When the assurance practitioner is not the auditor of the entity and assurance is sought over historical financial information, the assurance practitioner may be limited in their ability to obtain sufficient appropriate evidence in relation to that historical financial information. For example, among other factors, the assurance practitioner’s considerations in determining whether the preconditions for the engagement are met may include whether they have or will be able to obtain sufficient knowledge of the entity and understanding of risks given the compressed timeline often involved in these types of assurance engagement. The assurance practitioner will need to perform a review engagement that meets the requirements of ISRE (NZ) 2400 on the historical financial information in order to obtain sufficient evidence on which to base the limited assurance conclusion.

A13. The responsible party’s responsibility for the preparation of the financial information may also include responsibility for the selection of the financial information, including whether it contains comparative information, and for determining the applicable time period to be covered by the financial information.

A14. In an engagement to provide assurance over pro forma financial information (both historical and prospective), the responsible party’s responsibility for the preparation of the financial information may include:

• Selecting the basis of preparation of the pro forma financial information;

• Selecting the base financial information used as the source for the pro forma financial information;

• Selecting and determining the pro forma adjustments;

• Preparing pro forma financial information in accordance with the stated basis of preparation.

A15. In circumstances where the assurance practitioner cannot access, or obtain access to, documentation supporting the source of the base historical financial information or the pro forma adjustments, or does not audit one of the entities whose financial information is included in the pro forma historical financial information, the assurance practitioner and responsible party may alternatively agree for an assurance engagement to be conducted to report on the compilation of the pro forma historical financial information. When the assurance practitioner is required to provide assurance on whether the pro forma financial information has been properly compiled, refer to ISAE (NZ) 3420 Assurance Engagements to report on the Compilation of Pro Forma Financial Information Included in a Prospectus.

A16. Circumstances such as those outlined in paragraph A15 may occur, for example, when:

• The capital raising involves a takeover transaction in which neither the assurance practitioner nor the responsible party of the entity are able to access the other entity’s financial information.

• The capital raising involves a takeover transaction where the other entity has not been subject to an audit or review.

• There is insufficient time in which to conduct the engagement to enable the expression of assurance on the pro forma historical financial information itself.

A17. An illustrative engagement letter is presented in Appendix 1.

A18. The objective and scope agreed in the terms of engagement may include, for example:

• The assurance practitioner’s understanding of the purpose of the assurance engagement, the nature of, and time period covered by, the financial information, and the intended users of the assurance report.

• Confirmation that the assurance practitioner will conduct the engagement in accordance with this SAE.

• That the responsible party is responsible for the preparation of the financial information.

• That the assurance practitioner will assess whether the financial information has been prepared in accordance with the stated basis of preparation.

• That an audit is not being performed and that consequently, an audit opinion will not be expressed.

• The type(s) and proposed wording of the assurance conclusion.

• That the engagement cannot be relied upon to identify fraud, errors, non- compliance with laws or regulations or other irregularities that may exist within the entity.

A19. Other terms that the assurance practitioner may consider appropriate to agree include, for example:

• A description of the assurance procedures to be performed.

• Important timelines for the completion of the engagement, for example, the expected date of publication of the financial information and when the assurance practitioner’s consent is required.

• Arrangements regarding the planning and performance of the engagement, including the composition of the engagement team.

• Arrangements for the assurance practitioner to:

• • Attend meetings such as the due diligence committee meetings, if applicable.

  • Receive draft and final versions of the financial information.

  • Use the services of the responsible party’s experts.

  • Communicate directly with the entity’s external auditor regarding matters relevant to the financial information.

  • Provide consent to the inclusion of the assurance practitioner’s assurance report.

A20. Changes in the terms of the engagement are required to be agreed in writing to ensure no misunderstanding occurs between the parties of what has been agreed.

A21. The type of planning activities the assurance practitioner performs depends on the level of understanding of the entity the assurance practitioner has. The required understanding may be obtained from prior audit or review engagements performed.

A22. The assurance practitioner may decide to discuss elements of planning with the responsible party when determining the scope of the engagement or to facilitate the conduct and management of the engagement (for example, to coordinate some of the planned procedures with the work of the entity’s personnel). Although these discussions often occur, the overall engagement strategy and the engagement plan remain the assurance practitioner’s responsibility. When discussing matters included in the overall engagement strategy or engagement plan, care is required in order not to compromise the effectiveness of the engagement. For example, discussing the nature and timing of detailed procedures with the responsible party may compromise the effectiveness of the engagement by making the procedures too predictable.

A23. The performance of an assurance engagement is an iterative process. As the assurance practitioner performs planned procedures, the evidence obtained may cause the assurance practitioner to modify the nature, timing or extent of other planned procedures. In some cases, information may come to the assurance practitioner’s attention that differs significantly from that expected at an earlier stage of the engagement.

A24. The concept of materiality generally includes the principles that:

• Misstatements, including omissions, are considered to be material if they, individually or in the aggregate, could reasonably be expected to influence relevant decisions of users taken on the basis of the financial information;

• Judgements about materiality are made in light of surrounding circumstances, and are affected by the size or nature of a misstatement, or a combination of both; and

• Judgements about matters that are material to intended users of the financial information are based on a consideration of the common information needs of intended users as a group. Unless the engagement has been designed to meet the particular information needs of specific users, the possible effect of misstatements on specific users, whose information needs vary widely, is not ordinarily considered.

A25. The stated basis of preparation may discuss the concept of materiality in the context of the preparation and presentation of the financial information. Such a discussion, if present in the stated basis of preparation, provides a frame of reference to the assurance practitioner in determining materiality for the engagement. If the stated basis of preparation does not include a discussion of the concept of materiality, the characteristics referred to above provide the assurance practitioner with such a frame of reference.

A26. The assurance practitioner may not be able to identify all those who will read the assurance report, particularly where there are a large number of people who have access to it. In such cases, particularly where possible users are likely to have a broad range of interests, intended users may be limited to major stakeholders with significant and common interests. Intended users may be identified in different ways, for example by agreement between the assurance practitioner and the engaging party, or by law or regulation.

A27. Judgements about materiality are made in light of surrounding circumstances, and are affected by both quantitative and qualitative factors. However, decisions regarding materiality are not affected by the level of assurance, that is, materiality for a reasonable assurance engagement is the same as for a limited assurance engagement. Materiality calculated for purposes of the financial information may not necessarily be the same amount as would be calculated for an audit or review of the annual financial statements due to difference in the purpose for which the financial information is prepared and potential differences in who the intended users are.

A28. The assurance practitioner’s determination of materiality may need to be revised during the engagement as a result of:

• A change in circumstances (for example, the disposal of a major part of the entity’s business).

• New information, or a change in the assurance practitioner’s understanding of the entity and its operations as a result of performing procedures. For example, it may become apparent during the engagement that accounting estimates used are likely to be substantially different from those included in the financial information used to determine materiality.

If during the engagement the assurance practitioner concludes that a lower materiality for the financial information (and, if applicable, materiality level or levels for particular types of accounts or disclosures) than that initially determined is appropriate, it may be necessary to revise materiality and the nature, timing and extent of the further procedures.

A29. The understanding of the entity required by paragraph 20 might include:

• Its size and complexity.

• Its ownership and management structure.

• The regulatory environment.

• Key strategies.

• Products and services.

• The industry in which the entity operates.

• Its operating history.

• Available financial resources and obligations.

• Any changes from prior financial reporting periods in the nature or extent of its operations, including whether there have been any mergers or acquisitions.

A30. Obtaining an understanding of the source and basis of preparation of the financial information and other engagement circumstances provides the assurance practitioner with a frame of reference for exercising professional judgement throughout the engagement, for example when:

• Considering the characteristics of the source of the financial information;

• Assessing the suitability of the stated basis of preparation;

• Considering the factors that, in the assurance practitioner’s professional judgement, are significant in directing the engagement team’s efforts, including where special consideration may be necessary; for example, the need for specialised skills or the work of an expert;

• Establishing and evaluating the continued appropriateness of quantitative materiality levels (where appropriate), and considering qualitative materiality factors;

• Developing expectations for use when performing analytical procedures;

• Designing and performing procedures; and

• Evaluating evidence, including the reasonableness of the oral and written representations received by the assurance practitioner.

A31. In a limited assurance engagement, obtaining an understanding of internal control over the process used to prepare the financial information assists the assurance practitioner in designing and performing procedures that address the areas where a material misstatement of the financial information is likely to arise. In considering the process used, the assurance practitioner uses professional judgement to determine which aspects of the process are relevant to the engagement and may make enquiries of the appropriate party about those aspects.

A32. The assurance practitioner’s understanding of the financial information generally includes obtaining an understanding of:

• The type, source and nature of the financial information.

• The time period covered and the reasons for its selection.

• Its intended use.

• The extent to which the financial information may be affected by the responsible party’s judgements.

• Whether the financial information contains comparative information, whether such comparative information will be restated, and if so, why.

• Identifying relevant information available in the public domain.

• Identifying expected and plausible relationships within the financial information for use when performing analytical procedures.

• Whether the financial information has been previously audited or reviewed and, if so, the type of audit opinion or review conclusion expressed in the assurance practitioner’s report.

• Whether the financial information has been prepared on a consistent basis with that of any prior period audited or reviewed information included in the document.

• Whether adjustments have been made that were considered immaterial in the prior period audit or review.

A33. The stated basis of preparation of the financial information may differ from prior audited or reviewed historical information also included in the published financial information. When this is the case, the required understanding of the accounting policies that have been adopted, includes an understanding of why the stated basis of preparation differs from prior audited or reviewed historical financial information.

A34. Relevant industry factors may include industry conditions, such as the competitive environment, supplier and customer relationships, and technological developments. Examples of matters the assurance practitioner may consider include:

• The market and competition, including demand, capacity, and price competition.

• Common business practices within the industry.

• Cyclical or seasonal activity.

• Product technology relating to the entity’s products.

A35. Relevant legal and regulatory factors may include the applicable financial reporting framework in accordance with which periodic financial information is prepared, and the legal and political environment. Examples of matters the assurance practitioner may consider include:

• Industry specific accounting practices.

• The legal and regulatory framework for a regulated industry.

• Legislation and regulation that directly affect the entity’s or any acquiree’s or divestee’s operations, including direct supervisory activities.

• Taxation.

• Government policies that may be relevant to the entity or any acquiree or divestee.

• Environmental requirements affecting the entity’s or any acquiree’s or divestee’s industry and business.

A36. Other external factors might include the general economic conditions, interest rates and availability of financing.

A37. When the base financial information has been previously audited or reviewed, the assurance practitioner may:

• Request a copy of the audit or review report accompanying the base financial information and, if obtained, read it to understand the type of report issued and, if modified, the reasons for the modification;

• Contact the other assurance practitioner to request access to engagement documentation supporting the report and, if provided, read the documentation to assess the appropriateness of the approach taken for the purposes of placing reliance on that audit or review report in assessing the appropriateness of the source of the base financial information. This includes assessing the appropriateness of the materiality level applied in relation to the audit or review of the base financial information as compared to the materiality level assessed for purposes of the limited assurance engagement;

• Read the base financial information to which the audit or review report relates to establish if its stated basis of preparation (that is, its accounting policies) and time frame covered are appropriate; or

• Plan to perform further procedures as is considered necessary in the engagement circumstances.

A38. As noted in paragraph A15, if the assurance practitioner has not previously performed an audit or review of the historical financial information, the assurance practitioner may instead consider performing an assurance engagement on the compilation of the pro forma historical financial information in accordance with ISAE (NZ) 3420¹³. If the assurance practitioner nevertheless agrees to perform an assurance engagement incorporating historical financial information they did not audit or review and requests access to the engagement documentation of another assurance practitioner and is unable to obtain such access, this may constitute a limitation of scope of the engagement. If the assurance practitioner is unable to obtain sufficient appropriate evidence by other means, the assurance practitioner considers the impact on the engagement and the assurance report.

A39. In respect of the pro forma adjustments, the understanding obtained by the assurance practitioner may include:

• Identifying the pro forma adjustments.

• Understanding the event or transaction that the pro forma adjustments are intending to record.

• Understanding the methodology used by the responsible party in formulating the pro forma adjustments, including the basis for, and calculations underlying them.

A40. The understanding of the stated basis of preparation of the prospective financial information obtained by the assurance practitioner may include an understanding of:

• Its relevance, completeness, reliability, and understandability; and

• Any differences between the stated basis of preparation and that used in the most recent audited or reviewed historical financial information.

A41. When identifying areas where a material misstatement is likely to arise and designing procedures to address the risks identified, the assurance practitioner may take into consideration matters such as:

• The likelihood of intentional misstatement in the financial information;

• Applicable law or regulatory requirements or guidance with respect to the preparation or presentation of the financial information;

• The complexity and degree of subjectivity underlying calculations of information which are included in the financial information; and

• How the responsible party makes significant accounting estimates and the data on which they are based.

A42. The nature, timing and extent of assurance procedures is influenced by various factors, for example:

• The identification of areas where material misstatement of the financial information is likely to arise and its impact on the sufficiency and appropriateness of evidence.

• The stated basis of preparation chosen by the responsible party.

• Whether some of the financial information has previously been audited or reviewed.

• Whether the financial information is prepared on the same basis as prior period audited or reviewed historical financial information, and if not, why not.

• Whether the source and time period covered by the financial information are appropriate and consistent with the stated basis of preparation.

• Whether misstatements considered immaterial in prior period audited or reviewed historical financial information need to be corrected.

A43. In designing analytical procedures, the assurance practitioner determines the suitability of particular analytical procedures in relation to the financial information, taking into consideration the identified risks of material misstatement of the financial information.

A44. Analytical procedures may be effective when disaggregated data is readily available, or when the assurance practitioner has reason to consider the data to be used is reliable, such as when it is extracted from a well-controlled source. In some cases, data to be used may be captured by the financial reporting information system, or may be entered in another information system in parallel with the entry of related financial data and some common input controls applied.

A45. The assurance practitioner’s enquiries of the responsible party regarding significant accounting estimates may address:

• Whether the responsible party has appropriately applied the requirements of the stated basis of preparation relevant to material accounting estimates

• The method chosen for making material accounting estimates and whether:

• • It has been applied consistently;

  • It is appropriate when compared with the most recent audited or reviewed financial statements;

  • It reflects any changes in method from prior periods; and

  • Any changes in method are consistent with the stated basis of preparation.

A46. It may be appropriate for the assurance practitioner to evaluate how the responsible party has considered alternative assumptions or outcomes in determining the accounting estimates, and why it has rejected them.

A47. Other procedures in the context of material accounting estimates that the assurance practitioner may determine are appropriate in the circumstances may include:

• Testing how the responsible party made the accounting estimate and the data on which it is based.

• Evaluating whether the method of quantification used is appropriate in the circumstances.

• Evaluating whether the assumptions used by the responsible party are reasonable.

A48. Other procedures the assurance practitioner may consider appropriate depending on the nature and circumstances of the engagement may include:

• Reviewing key contracts.

• Reconciling key recorded accounts and balances to supporting documentation.

• Re-performing key calculations such as accounting estimates and reconciling differences noted.

• Performing external confirmation procedures.

A49. The assurance procedures on the pro forma historical financial information may include:

• Enquiring of the responsible party about:

• • The process and source from which the base historical financial information has been prepared and the reliability of the underlying accounting records to which the base historical financial information is agreed or reconciled;

  • Whether all transactions for the time period have been recorded;

  • Whether the base historical financial information has been prepared in accordance with the entity’s accounting policies;

  • Whether there have been any changes in accounting policies from the most recent audited or reviewed period, and, if so, how such changes have been dealt with;

  • Its assessment of the risk that the source may be materially misstated as a result of error or fraud; and

  • The effect of changes in the entity’s business activities and operations;

• If the assurance practitioner has audited or reviewed the immediately preceding annual or interim historical financial information, considering the findings of such audit or review and whether these might indicate any issues with the preparation of the source from which the base financial information has been extracted;

• Corroborating the information provided by the responsible party in response to the assurance practitioner’s enquiries, when the responses appear inconsistent with the assurance practitioner’s understanding of the entity, or the engagement circumstances; and

• Comparing the source from which the base historical financial information has been prepared with the corresponding prior period historical financial information and, as applicable, the immediately preceding annual or interim historical financial information, and discussing significant changes with the responsible party.

A50. When there is no audit or review report on the source from which the base financial information has been extracted, it is necessary for the assurance practitioner to perform procedures in relation to the appropriateness of that source (e.g., when historical financial information is extracted from financial statements or management accounts that were not audited or reviewed). Factors that may affect the nature and extent of these procedures include, for example:

• Whether the assurance practitioner has previously audited or reviewed the entity’s historical financial information, and the assurance practitioner’s knowledge of the entity from such engagement.

• How recently the entity’s historical financial information was audited or reviewed.

• Whether the entity’s financial information is subject to other periodic reviews by the assurance practitioner, for example, for purposes of meeting regulatory filing requirements.

• Whether the assurance practitioner is able to access documentation describing, and supporting, the source of the base historical financial information.

A51. For the pro forma historical financial information to be meaningful, it is necessary that the pro forma adjustments be consistent with the stated basis of preparation. For example, in the context of a business combination this may involve consideration of such matters as:

• Whether differences exist between the acquiree’s accounting policies and those of the entity; and

• Whether accounting policies for transactions undertaken by the acquiree that the entity has not previously entered into, are policies that the entity would have adopted for such transactions under its applicable financial reporting framework, taking into account the entity’s particular circumstances.

A52. Consideration of the appropriateness of the entity’s accounting policies may also be necessary in some circumstances. For example, as part of the event(s) or transaction(s), the entity may propose to issue complex financial instruments for the first time. If this is the case, it may be necessary to consider:

• Whether the responsible party has selected appropriate accounting policies to be used in accounting for such financial instruments under its applicable financial reporting framework; and

• Whether it has appropriately applied such policies in preparing the pro forma historical financial information.

A53. This SAE does not require the assurance practitioner to perform an audit or review of the source from which the base financial information has been extracted as part of the engagement, if such an audit or review has not already been performed. (Ref: Para. 33(c))

A54. A high risk that there may be a significant difference between the prospective financial information and actual results may call into question the suitability and reasonableness of the assumptions used as the basis for the preparation of the prospective financial information and their characterisation as reasonable. (Ref: Para. 33 (e))

A55. The assurance practitioner’s enquiries of the responsible party may also address the interaction of assumptions with each other. (Ref: Para. 35(b)(v))

A56. The assurance practitioner’s evaluation of the stated basis of preparation used by the responsible party may include: (Ref: Para. 37(a))

• The process for its selection and approval;

• The differences, if any to the basis of preparation, adopted in the most recent financial report; and

• Its suitability for the preparation of the prospective financial information, based on the stated purpose of the prospective financial information.

A57. Prospective financial information ordinarily becomes more speculative and less verifiable as the length of the period covered increases. (Ref: Para. 38(a))

A58. The assurance procedures on the pro forma prospective financial information may include:

• Enquiring of the responsible party about:

• • The process by which the base financial information has been prepared and the reliability of the underlying accounting records to which the base financial information is agreed or reconciled;

• • Whether all transactions for the time period have been recorded;

  • Whether the base financial information has been prepared in accordance with the entity’s accounting policies;

  • Whether there have been any changes in accounting policies from the most recent audited or reviewed period and, if so, how such changes have been dealt with;

  • Its assessment of the risk that the base financial information may be materially misstated as a result of error or fraud; and

  • The effect of changes in the entity’s business activities and operations;

• If the assurance practitioner has audited or reviewed the immediately preceding annual or interim financial information, considering the findings of such audit or review and whether these might indicate any issues with the preparation of the source from which the base financial information has been extracted;

• Corroborating the information provided by the responsible party in response to the assurance practitioner’s enquiries when the responses appear inconsistent with the assurance practitioner’s understanding of the entity or the engagement circumstances; and

• Comparing the base financial information with the corresponding prior period financial information and, as applicable, the immediately preceding annual or interim financial information, and discussing significant changes with the responsible party.

A59. When there is no audit or review report on the source from which the base financial information has been extracted, the assurance practitioner’s procedures may include those necessary to obtain sufficient appropriate evidence about that source. Factors that may affect the nature and extent of these procedures include, for example:

• Whether the assurance practitioner has previously audited or reviewed the entity’s historical financial information and the assurance practitioner’s knowledge of the entity from such engagement.

• How recently the entity’s historical financial information was audited or reviewed.

• Whether the entity’s financial information is subject to other periodic reviews by the assurance practitioner, for example, for purposes of meeting regulatory filing requirements.

• Whether the assurance practitioner is able to access documentation describing and supporting the source of the base historical financial information.

A60. For the pro forma prospective financial information to be meaningful, it is necessary that the pro forma adjustments be consistent with the stated basis of preparation. In the context of a business combination, for example, this may involve consideration of such matters as:

• Whether differences exist between the acquiree’s accounting policies and those of the entity; and

• Whether accounting policies for transactions undertaken by the acquiree that the entity has not previously entered into are policies that the entity would have adopted for such transactions under its applicable financial reporting framework, taking into consideration the entity’s particular circumstances.

A61. Consideration of the appropriateness of the entity’s accounting policies may also be necessary in some circumstances. For example, as part of the event(s) or transaction(s) the entity may propose to issue complex financial instruments for the first time. If this is the case, it may be necessary to consider:

• Whether the responsible party has selected appropriate accounting policies to be used in accounting for such financial instruments under its applicable financial reporting framework; and

• Whether it has appropriately applied such policies in preparing the pro forma prospective financial information.

A62. The assurance practitioner may decide to engage an expert to, for example:

A63. The expert may be an assurance practitioner’s internal expert (i.e., from the assurance practitioner’s firm) or an external expert.

A64. An illustrative representation letter is presented in Appendix 2.

A65. If the assurance practitioner becomes aware of events, transactions or errors after the document has been lodged with the appropriate regulatory body, the assurance practitioner considers the implications for the assurance report, as well as any obligation the assurance practitioner may have to inform the entity issuing the document.

A66. The assurance practitioner considers the appropriateness of the going concern assumption of the entity when the nature of the assurance engagement means that such an assessment could have implications for the assurance report. Ordinarily the assessment of going concern is appropriate for assurance engagements relating to historical financial information. Ordinarily in an engagement to report on prospective financial information, the going concern assumption is not relevant to the assurance practitioner’s conclusion as the nature of the information is based on anticipated event(s) or transaction(s) that have not occurred and its preparation requires the exercise of considerable judgement by the responsible party.

A67. If the assurance practitioner considers that performing a going concern assessment is relevant, the assurance practitioner ordinarily performs the assessment as if the events or transactions giving rise to the capital raising had occurred, and considers, for example, the entity’s prepared future forecasts, future cash flow statements, the directors’ working capital statements, and financial position and any other event(s) or condition(s) that are relevant to the assessment. For example, if the prospects for profitability are not supported by adequate positive future cash flows, then both the forecast financial performance statement and the ongoing viability of the entity are at risk. There may also be mitigating factors that in the assurance practitioner’s professional judgement eliminate the going concern uncertainty. Mitigating factors may include:

• A review of recently prepared forecasts, cash flow statements, working capital statements or statements of financial performance;

• Unequivocal financial support provided from another entity which has the capacity to provide support;

• A signed underwriting agreement being in place; and/or

• The underlying event(s) or transaction(s) giving rise to the document (for example, a capital raising) which will, if completed successfully, raise sufficient funds to result in the entity becoming a going concern.

Mitigating factors need to be supported by appropriate written evidence. In such circumstances, the assurance practitioner evaluates and documents how the unequivocal financial support or proceeds from the fundraising issue will provide funding for future operations of the entity that will result in the entity becoming a going concern. Consideration is given to any proposed underwriting of any capital raising, and the circumstances in which the proposed underwriting may not occur. The assurance practitioner may also consider it necessary to request a written representation from the responsible party regarding the appropriateness of the going concern assumption.

A68. If the assurance practitioner does not consider the going concern assumption to be appropriate to the entity, the implications for the assurance report depend on whether the responsible party has modified the basis of preparation of the financial information from that of a going concern basis:

1. If the basis has not been modified, then the conclusion in the assurance report may need to be modified on the basis of the going concern assumption being inappropriate to the historical financial information; or

2. If the basis has been modified, and the assurance practitioner considers the basis to be appropriate, then the assurance practitioner may still include an Emphasis of Matter paragraph in the assurance report to draw attention to the disclosure of this alternate basis.

A69. The assurance report may be prepared solely in respect of one type of financial information or may be a composite report where two or more types of financial information are the subject of the assurance report (for example historical and prospective financial information).

A70. In a composite report:

1. The different types of financial information should be clearly identified in the financial information, and separately referred to in the assurance report; and

2. The assurance report should clearly identify and segregate the work carried out and the conclusion expressed on the different types of financial information.

A71. Illustrative assurance reports are presented in Appendix 3.

A72. In addition to the required basic elements, the assurance report may include a liability statement.

A73. The assurance practitioner may wish to refer to both this standard and ISAE (NZ) 3000 (Revised) and the applicable Review Engagement Standard in the assurance report. The assurance practitioner is not precluded from doing so. For example, we have conducted our review of the historical financial information in accordance with SAE 3450, Assurance Engagements Over Financial Information Prepared in Connection with a Capital Raising and NZ SRE 2410 (Revised), Review of Financial Statements Performed by the Independent Auditor of the Entity.

A74. An appreciation of the nature, timing and extent of procedures performed is essential for the intended users to understand the conclusion expressed in a limited assurance report. A description of the assurance practitioner’s procedures in a limited assurance engagement is ordinarily therefore more detailed than in a reasonable assurance engagement. It also may be appropriate to include a description of the procedures that were not performed that would ordinarily be performed in a reasonable assurance engagement. However, a complete identification of all such procedures may not be possible because the assurance practitioner’s understanding and assessment of the risks of material misstatement are less than in a reasonable assurance engagement. The assurance practitioner does not ordinarily detail all procedures in the assurance report.

A75. Factors to consider in making that determination and the level of detail to be provided include:

1. Circumstances specific to the entity (for example, the differing nature of the entity’s activities compared to those typical in the sector);

2. Specific engagement circumstances affecting the nature and extent of the procedures performed; and

3. The intended users’ expectations of the level of detail to be provided in the assurance report based on market practice, or applicable laws or regulations.

A76. In describing the procedures performed in a limited assurance report, it is important that they are written in an objective way but are not summarised to the extent that they are ambiguous, nor written in a way that is overstated or embellished or that implies that reasonable assurance has been obtained. It is also important that the description of the procedures does not give the impression that an agreed-upon procedures engagement has been undertaken.

A77. The assurance practitioner ordinarily reads all other information included in the public document for consistency with the financial information. The assurance practitioner’s reading of the other information does not infer any assurance on that information, as the assurance practitioner reads it only to establish if there are any material inconsistences or misstatements which may impact the financial information.

A78. The assurance practitioner ordinarily pays particular attention to the following disclosure areas within the published financial information:

• Other financial information not subject to the assurance engagement including:

• • Summarized financial information, for example, in tabular or graphical forms.

  • Disclosures related to other financial information that has been previously audited or reviewed.

  • Management discussion and analysis discussing other financial information.

• Disclosures about the nature of the events or transactions giving rise to the preparation of the published financial information.

• Qualitative and quantitative disclosures about the entity’s plans and future outlooks.

• Key trends and factors related to the entity’s industry or nature of operations that tare likely to affect the entity’s strategy or the timeframe over which achievement of the strategy is planned.

• Other relevant disclosures, for example:

• • Explanations of how revenue would be generated.

  • Nature and extent of related party disclosures.

  • Valuation of material assets.

A79. If there are material inconsistencies, or material misstatements, related to the financial information which are not corrected by the responsible party, or the assurance practitioner does not consider the assurance report will be used for the intended purpose, the assurance practitioner ordinarily does not provide consent.

A80. Consent is ordinarily provided by way of a separate consent letter issued to the entity prior to the assurance report.