Part (c) for 6 marks required three procedures in examining the cash flow forecast of the company. This question was unsatisfactorily answered by most candidates.

Common errors included:

• Confusing a cash flow forecast and a cash flow statement 
• Not appreciating that the forecast covered a future period as opposed to historic information, therefore it would not be possible to perform such procedures as ‘agreeing revenue to sales invoices’. 
• Providing procedures which were unrealistic, such as ‘compare the forecast to competitors cash flow forecast’ it would not be possible to obtain the forecast of a competitor 
• Providing procedures which are relevant for an audit as opposed to future information such as ‘perform a receivables circularisation to confirm receivable balances’ 
• Not understanding that a cash flow forecast does not contain non-cash items such as depreciation 
• Few candidates understood that a forecast would be made up of assumptions and hence these needed to be reviewed in detail for reasonableness.