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Hello Mike,
In the sample answer, one of the planned procedures is as follows:
“Obtain any due diligence reports which have been obtained by the Group and review for matters which may need to be disclosed in accordance with IAS10 or IFRS 3.”
Regarding the above procedure, I have two questions as follows:
1. The case scenario states that “due diligence is taking place currently”. If the due diligence is taking place currently, why there are due diligence reports being obtained by the Group already?
Does it mean that the accounting firm undertaking the due diligence review will produce multiple reports? some reports will be produced while due diligence review is in process, while others will be produced after the due diligence review being completed?
If my above assumption is correct, can you provide me some examples regarding what report will be produced from due diligence review?
2. What is the purpose for this procedure? My understanding is that as an auditor we need to make sure the planned acquisition shortly after year end to be disclosed in the note.
As such, can I change the procedure to “Obtain any due diligence reports which have been obtained by the Group and review for matters which may need to be disclosed, to ensure the info regarding planned acquistion disclosed in the note are consistent with the due diligence report”.
Thank you.
Regards,
MarthewHmmm, very strange
I suppose that the answer could (unlikely) be referring to other, previous acquisitions and their respective due diligence reports to point us in the right direction for disclosure matters in relation to the proposed acquisition of Azalea
It could (more likely) be referring to the planned procedure that should take place during the final audit. The year end is 31 May and the planned acquisition date is “early June” so there will need to be disclosure of a non-adjusting subsequent event in the May financial statements
The question is an audit planning exercise so there’s no implication that any due diligence reports are already available for inspection – it’s simply saying that these reports WILL BE available by the time our team is ready to appear and start our audit work
OK?
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