Other Assignments

SECTION B: ADVISORY REPORT You are a manager at Stellar Advisory. OrbitData Solutions (OrbitData) is an existing audit client of your firm, with a financial year-end of 31 March 20X6. OrbitData provides high-resolution satellite imaging data to agricultural and defense sectors. OrbitData is currently seeking a $50 million syndicated bank loan to fund the design, manufacture, and launch of a new constellation of five micro-satellites. The bank has requested that OrbitData provide a business plan, including Prospective Financial Information (PFI) comprising a forecast statement of profit or loss and cash flows for the five years ending 31 March 20Y1. The Board of Directors of OrbitData has approached Stellar Advisory to examine and provide an assurance report on this PFI to be submitted to the bank. The PFI includes significant assumptions regarding future revenue from uncontracted defense clients and massive capital expenditure for the satellite launches. Required: (a) Identify and explain the matters to be considered by Stellar Advisory before accepting the engagement to report on OrbitData's Prospective Financial Information (PFI). (8 marks) (b) Describe the examination procedures you would perform to obtain sufficient appropriate evidence regarding the forecast revenue and forecast capital expenditure within the PFI. (17 marks)

SECTION B - ADVISORY REPORT You are a manager in the advisory department of TechAssure LLP. Your client, QuantumLogix Co, a highly successful software development firm, is planning to acquire 'SentinelByte', a rapidly growing cybersecurity startup. QuantumLogix has requested your firm to perform a combined engagement: 1. A financial due diligence review of SentinelByte. 2. An examination of SentinelByte's Prospective Financial Information (PFI), specifically a profit forecast for the next three years, which SentinelByte's founders have prepared to justify their high asking price. SentinelByte operates a subscription-based model for its cloud security software. The PFI shows revenue tripling over the next three years. The founders claim this is based on securing two major government contracts currently out for tender, and an assumption of a 98% customer retention rate. Requirements: (a) Discuss the specific matters to be considered and the risks involved before TechAssure LLP accepts this combined due diligence and PFI engagement. (8 marks) (b) Evaluate the key assumptions management is likely to have made in preparing the revenue forecast for SentinelByte, and explain the professional skepticism required by the practitioner. (9 marks) (c) Recommend the specific examination procedures to be performed on SentinelByte's revenue forecast. (8 marks)