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Yep, this understood.
But how does the subject matter would look like?
For example, valuation based on discounted free cash flow?
And who is going to prepare the such valuation (in case the management is lacking the expertise)?Thanks
Dear Kim,
Thank you for your explanation and references to the standard, it helped.
Coming back to the assurance engagement and the subject matter.
Who would be preparing a subject matter? How would it look like?This part is confusing because Kaplan text provides the benefits of providing due diligence. For example:
“- Enhance the credibility of the investment decision –
Engaging an external advisor to carry out the due diligence will ensure an
independent, objective view is obtained on the investment decision,
including the price to be paid.”So it sounds like the auditor should produce the subject matter and report on it at the same time.
Thanks,
ArtemDear Kim,
Thank you for your reply.
As an example I can refer to question RICK GROUP from March 2020.One of the requirements: (c) Using Exhibit 5, discuss whether it is appropriate for a joint audit to be performed on Michonne Co, commenting on the advantages and disadvantages of a joint audit arrangement. (6 marks)
Rick Group is planning the acquisition of a new foreign subsidiary, Michonne Co.
Then the audit committee has suggested a joint audit arrangement with Michonne Co’s current auditors (Lucille Associates).
If I understand correctly, in this set up, Atlanta & Co (our audit firm) and Lucille Associates would have to express a joint opinion on the financial statements of the Rick Group?
Wouldn’t it be more reasonable to approach Lucille Associates with referral instructions and request them to audit the financial information of Michonne Co for the purpose of the consolidated financial statement of the Group so Atlanta & Co could express their own opinion?