Clarification point 29 - Form of business plan (ITA clarification point 22, further clarification)

The Commission is content that SIR 3000 is the appropriate framework to govern the work leading to the auditors' opinion on a bidder's financial model set out in section 14.4 of the ITA.

SIR 3000 specifically allows for the tailoring of the auditors' work programme and report where no historical information is included with the profit forecast. Limited additional tailoring will also be appropriate to reflect:

i)      the components of the bidder's financial model compared with an investment circular (for example, the inclusion of the required balance sheets and cashflow statements); and

ii)     the statements in the ITA regarding the Commission's own comparative analysis of business plans (ITA, 14.4, 3rd paragraph) and the Commission gaining its own understanding of the key drivers and underlying dynamics of the bidders' models (ITA, 14.4, 5th paragraph).

Therefore, the Commission would not, for example, expect the auditor to undertake any work in connection with the realism of the material assumptions underpinning the model (SIR 3000, 54(b)).

The Commission notes that the Auditing Practices Board, in deciding not to promulgate ISAE 3000, commented that it doubted that ISAE 3000 was sufficiently precise to serve as a standard for a variety of assurance engagements because it was too broadly based. On this basis it is not considered that the adoption of ISAE 3000 in the present context would comply with the requirements of section 14.4 of the ITA.

Issue date: 13 December 2006