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- March 15, 2017 at 7:46 am #377755AnonymousInactive
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have seen these questions in many question papers can some one assist with proper answer
1 .the specific matters to be considered before accepting appointment as a principal auditor to a group ?
2 .the group audit problems and audit procedures specific to a business combination including goodwill, accounting policies,inter company and the classification of investment, equity accounting for associates, and accounting for foreign subsidiary .?
3 .the audit risk and neccesary audit procedures relevant to the consolidation process
March 28, 2017 at 8:49 am #3794201) Too many for me to type out but the answer centres around practice management, competence and logistics
2) All a lot of common sense! How do you audit goodwill? You apply the same basic principles as you would to the audit of any asset – accurate, complete, ownership, computation, measurement ….
Accounting policies? – determine which policies are applied by the new subsidiary and compare them with the equivalent acquirer’s policies
Classification? >50%? Probably a subsidiary >20% but <50%? Probably an associate But remember IFRS 10 and effective control
Equity accounting – depends upon the classification – if it’s correctly classified as a joint venture or as an associate, then equity accounting needs to be applied (revision of F7 material)
Foreign subsidiary? All the standard problems – currency, exchange rates, distant operations, foreign governments, inability to gain access to reserves and assets, integrity of foreign operation’s management …
3) Never eat cake eat sardine sandwiches and remain young
That’s how necessary is spelt!
Audit risk – incomplete or inaccurate treatment of matters arising in a group environment – pups, intra-group trading, nci matters, dividends, pre and post acquisition split, time apportionment of revenues and expenses … – and audit procedures? How do you confirm the accurate and acceptability of the client’s treatment of those consolidation adjustments?
If, as you say, you “have seen these questions in many question papers”, why are you not able to pick the meat from the bones of the printed solutions to these many group questions that you have seen?
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