Author Question: _________ financial statements are projections of financial statements based on a set of assumptions ... (Read 251 times)

@Brianna17 · **on:** Jul 6, 2018

_________ financial statements are projections of financial statements based on a set of assumptions regarding future revenues, expenses, level of investments in assets, financing methods and costs, and working capital management.

Fill in the blanks with correct word

Question 2

What is a method of proof? Briefly explain the difference between a direct and an indirect method of proof.

What will be an ideal response?

aliotak · **Reply #1 on:** Jul 6, 2018

Answer to Question 1

Pro forma

Answer to Question 2

Method of proof can be defined as the means by which evidence is developed and presented to establish (or not) the requisite degree of belief or standard of proof, either a preponderance of the evidence or beyond a reasonable doubt. Methods of proof employed by forensic accountants can be direct, indirect, or a combination of the two.
A direct method of proof is a clear-cut or definite means of conclusively establishing a fact at issue such as a false expense or unreported income without inference or presumption. Direct methods of proof typically rely on documentary evidence such as tax returns, books and records, bank statements, invoices, cancelled checks, and contracts and the testimony of witnesses with firsthand knowledge such as bookkeepers, tax return preparers, employees, bankers, or real estate agents.
An indirect method of proof is not straightforward, but is instead built on circumstantial evidence. Circumstantial evidence is based on inference rather than personal knowledge or direct observation. Indirect methods of proof are founded on logic, common sense, critical thinking, and deductive reasoning. Indirect methods are most commonly employed in the absence of reliable books and records.