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Kim Smith.
Kim Smith.-
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toushiga
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Ms,For PYQ June 2015 Q2(a)(ii) “audit evidence in the audit working paper”
1.For the 6th point,why need to assess the plan when the Baldrick Co eventually need to consolidate with Parent Co no matters whether its operation have been integrated with those rest of the Group?
Thank you.
Kim Smith
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The “matter” is whether a 52% holding should have been accounted for as a subsidiary rather than an associate – evidence therefore includes ideas that support control rather than significant influence.
Per the scenario – management’s justification for what appears to be an incorrect treatment is “Baldrick Co’s operations have not yet been integrated with those of the rest of the
group” – therefore that should be examined as audit evidence.toushiga
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Does it therefore should consolidate on the acquisition date in this case 1 Jan 2015 for Baldrick Co rather than wait or review the future plan for integrating the Co into the Group which is incorrect?
Kim Smith
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Yes – control was obtained on acquisition date through 52% holding.
toushiga
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So if the management justification is incorrect ,why still need to review of forecast and budgets to assess the plans for integrating Baldrick Co into the Group which is the 6th point of evidence,should it be collecting evidence regards to consolidation?
Thank you.
Kim Smith
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It’s not relevant to accounting treatment but relevant to understanding the entity.
toushiga
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