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If we own a substantial shareholding (eg 50%)in another company , what right of acces do we have to their records,i.e what information of that company are we allowed to access as auditors?
I think you mean if we are auditing a client which has a subsidiary (the auditor does not have shareholdings in client companies).
An auditor generally has the right to access all information (books/records/minutes of meetings and request information from officers), which is relevant to the audit of a client company (e.g. in the UK, this is a provision of the Companies Act 2006). In a group situation, the auditor obviously have rights to access information of the parent preparing the consolidated accounts. In many cases, the auditor will also be the auditor of subsidiary companies.
If a subsidiary is audited by another (“component”) auditor, it will be the auditor who has the right. The group auditor will work with the component auditor to obtain whatever information is necessary (ISA 600). Also bear in mind that, by definition of control, the parent’s management must be able to obtain for the the group auditor any information relating to subsidiaries.
Hi,
No I dont mean in a group structure.
For example, June 2016 past parer:
In March 2016, ZCG purchased a 50% equity shareholding in Wallace Telecoms Co (WTC), a company operating in several countries where ZCG previously had no interests. The other 50% is held by Wolf Communications Co. The cost of the 50% equity shareholding was $45 million. ZCG is planning to account for its investment in WTC as a joint venture in the Group financial statements.
Recommend the principal audit procedures to be performed on:
(i) The classification of the 50% equity shareholding in WTC as a joint venture.I was wonedring if the auditor would ask WALLACE TELECOMS Co for a shareholding register to confirm that ZCG now has a 50% equity holding?
It’s irrelevant to the question – the Q told you it’s 50% and that could be verified by looking at the purchase contract/share certificate held by ZCG/agreeing that the no. of shares held is 1/2 of WTC’s shares in issue as shown in the WTC’s financial statements, etc.
If it were relevant, I have already answered the Q – ZCG is a group and WTC would be a component. A component is “an entity or business activity for which group or component management prepares financial information that should be included*** in the group financial statements” – it therefore includes JVs and associates.
***It doesn’t say how included – so this is wider than consolidated.
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