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Hello sir,
I have a specific question on BBP’s solution for Montreal & Co – Jun 2016. The question says that both of the subsidiaries were acquired as wholly owned subsidiaries many years ago. The answer says “All consolidation adjustments should be reviewed and recalculated, for example pre-acquisition reserves and goodwill for subsidiaries, along with any fair value adjustments.” in part c – which is “Audit procedures that should be performed on the consolidation process.”
My question is why we need to audit the pre-acquisition reserves? It was done many years ago so irrelevant and for current year audit, we will just check the balances are brought forward properly.
Thanks alot and regards,
As you describe it this part (c) was not part of the original Q. It does sound a bit “generic” and if an exam Q says “many years ago” I would similarly assume the acquisition, per se, to be irrelevant (which is probably why the audit of the consolidation was not an original requirement). I guess it’s possible that there could still be a FV adjustment though this would be a minor point in the absence of some clear pointer towards it.
Unless there is any specific mention of some issue with reserves on prior year consolidations (I can’t image what though) I suggest you ignore.
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