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Hi Sir Mike,
If on the exam question it says :
Bill Co has a year ending 30 June 2011 and audit planning has been largely completed by previous assigned audit manager Tata .. The forecast revenue for the year $10.8m.. PBT $2.5m, asset $95m.
‘Treasured Homes’ operates separately.. this division will be sold. On the board minute dated 1 June 2011, ‘interest has already been expressed in this division’.. hoping negotiations will soon commence leading to sale in August 2011.
— On the tutorial note under audit procedures it says: by the time the final audit work is carried out, sale negotiations should be in the advance stage, so evidence should be easy to obtain.
*My question is if we are preparing for the audit of FS for the year ending 30 June 2011, and as at 1 June 2011 ‘interest’ has just been expressed, how could negotiation be in the advance stage when the final audit work is 30 June 2011?
How could this be possible if the accounting period that we have to audit is from 1 July 2010 to 30 June 2011?
FYI. This is based on Q1 (a)(i) of June 2011 exam.
Thanks and hope to hear from you soon.
Towards the end of the final audit it could be 12+ weeks since the year end – we’re looking at maybe the end of September, first half of October
Treasured Homes must have been ‘put on the market’ some time before 30 June, 2011 – say end of March.
By the year end the Board of Bill Co has had a number of interested enquiries and you should be able to audit the existence of those enquiries
Of course the Board should have probably a dedicated file recording the letters / emails and subsequent correspondence from these interested parties so you should be able to (a) confirm that those enquiries DID exist as at 30 June, 2011 and (b) that negotiations for the sale of Treasured Homes is at an advanced stage by the time the end of the final audit is being reached
OK?
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