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Hi,
I hopethat this is not too late.
The case indicates that the shareholders are currently happy with the level of dividends that they are getting. This therefore implies that they do not have any motivation to get involved with the day-to-day activities of the hotl (low interest). I guess it isobvious that the shareholders possess high power.
Regarding the directors, they have a very high motivation on the operations of the hotel. This is because their bonuses are pegged on high profitability. Consequently, they are likely to have a very keen interest on how the company is run.
I hope the above helps.
All the best to you tomorrow (assuming you’re sitting the exam in December) & to myself as well.
Regards,
SolomonI believe that the excess depreciation is in the subsidiary’s books and hence the need to allocate the NCI (which is a separate ‘entity’) its share. Remember, the reason we would eliminate it from the consolidated SOPL is because we treat the parent and subsidiary as one entity; and there cannot be transfers above carrying amount.
I hope you finally got it.
However, here’s my understanding of the three.
1. Tests of control- these are procedures applied by the auditor to test the effectiveness of internal controls. Remember, the auditor performs these tests in order to determine whether they can rely on the company’s internal controls. For example, requesting for goods using a dummy customer or from a customer with poor credit rating to see whether the company’s control system can prevent such an entry.
2. Substantive tests- these are procedures used to identify material misstatements in the financial statements as a result of error or fraud. For example, proof-in-total of payroll costs to determine whether the payroll costs in the P&L is accurately recorded.
3. Audit procedures- include both tests of control and substantive tests.
